I need your advice for the following. I am holding TCS 3200-call option (bought at ₹113), Infosys 1500-call (bought at ₹55) option and Wipro futures long (bought at ₹410). All are November contracts – Ajay Pradeep
TCS 3200-Call: The stock of TCS (₹3,103.3) appears to have formed a base between ₹2,950 and ₹3,000 and have recovered a bit. On the back of this, the recovery can be extended from the current level. So, you can hold the 3200-call option. But note that the upside can be limited as the stock could meet a falling trendline resistance (refer daily chart) anywhere between ₹3,200-3,225. Moreover, the trend has been bearish since the beginning of this year. Hence, it is better to exit the 3200-call (currently trading at around ₹68) at the prevailing price when the stock rallies to ₹3,200. Exit even if you’re at a loss. You can rebuy the same 3200-call or a call with higher strike if the stock decisively breaches the trendline resistance. That said, you should be mindful of the time decay the option will be subject to should there be a sideways movement from here. There is also the risk of a price drop rather than seeing a rally to ₹3,200. In that case, exit the option if the stock slips below ₹3,000 instead of appreciating to ₹3,200.
Infosys 1500-Call: The price action of the stock of Infosys (₹1,419.9) looks similar to TCS. That is, it has formed a base in the ₹1,360-1,385 price region and there is a falling trendline resistance which the stock could touch between ₹1,450 and ₹1,480 in the short run. Therefore, hold the 1500-call (currently trading at ₹28.9) and liquidate at the prevailing price when Infosys hits ₹1,470. Consider re-entering if the stock invalidates the trendline resistance. That said, the results are out, and the stock might see higher volatility in the near-term. In case if the scrip drops below ₹1,400, exit the call option regardless of the price.
Wipro futures: You can check our view on the stock of Wipro (₹379.1) here https://www.thehindubusinessline.com/portfolio/technical-analysis/technical-call-wipro-buy/article65984752.ece and manage your trade accordingly. But since you hold futures long you might have to maintain considerable amount of margin. You may consider buying a put option, probably 360-strike November put option which closed at ₹8.55 on Thursday.
That said, you should also be mindful of the time decay the long options will be subject to should there be a sideways movement.
In general, when you construct a derivatives portfolio, you will be better off if you consider stocks that are not from the same industry so that you can diversify some amount of risk. Particularly given that futures and options by itself are leveraged products.
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