F&O Query: Hold on to Nifty 50 call option

We expect the market to go up from the current levels.

For our latest analysis and prediction on indices, do check here. You can find our short, medium, and long-term expectations with important price levels on Nifty 50, Nifty Bank, and Sensex.

Coming to your position, since we’re bullish on Nifty 50, you can hold the December expiry 18200 CE. However, the option is now in-the-money (ITM) and as and when the market goes up from the current level, it’ll become a deep ITM option. Now, the problem with this is, it might become illiquid if it becomes deep ITM, making your exit difficult in case you plan to liquidate before expiry (I’ve assumed you’re holding December monthly series and not any weekly contract). So, our suggestion would be to exit this option and buy at-the-money (ATM) or slightly ITM option with the proceeds.

Nevertheless, if you wish to hold on to 18200 CE, the stop-loss should be decided based on the underlying and not the option price. Always remember that target and stop-loss levels for options on any security, be it index or stocks, should be based on the underlying’s price. So, the stop-loss, in terms of Nifty 50, for your position can be 18,250. That is, exit the option if the index falls below 18,250.

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