I have opened long-term option positions. I’ve bought one lot each of 18000CE and 18000PE of 30th March 2023 expiry. How to adjust the position if I have to carry until expiry?
Considering the current level of Nifty 50, you are essentially holding a long straddle.
Since the final week of December, the Nifty has held within 17,750 and 18,250. Only a breach of either of these levels can lend us some clue about the next leg of trend. Obviously, for option long positions, consolidation is an enemy. But since the region is broad, you are likely to get a chance to exit safely. Consider exiting the call when the index rallies to 18,250 and liquidate the put when the index declines to 17,750.
Since you have intended to carry till expiry and considering that there is a range in place at this juncture, we suggest you take measures to reduce the risk and the cost. Simply put, convert the long straddle to a long iron butterfly. You can do this by selling one out-of-the-money (OTM) call (preferably 18250CE) and one OTM put (preferably 17750PE) in addition to your existing positions.
A breakout of 18,250 can quickly lift the index to 18,450. So, if this occurs, exit the short call, and long put. Hold the long call and short put and exit these two positions when the index hits 18,450.
On the other hand, a breach of 17,750 can result in a fall to 17,500. In this case, exit long call and short put. Carry long put and short call and liquidate them when Nifty 50 falls to 17,500.
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