I am holding the Nifty 18350 CE option for Nov 10th expiry. Would you please advise me what would be the right time to exit my positions in the next two days? – Kishore Babu

Our view is bullish on Nifty 50. It is more likely to see a rally to 18,350 – the immediate notable resistance – from the current level 18,203. The index could even surpass that level to hit 18,550.

But the catch is, we cannot exactly predict the time it’ll take to move up to the above-mentioned levels. Remember, in general, predicting the direction is possible by using some techniques whereas to hit the bullseye with respect to time is very difficult. That’s the hard truth many analysts overlook. Of course, we can come up with an approximate time but not precisely. That said, unfortunately, we cannot avoid the time component when it comes to options. Time becomes critical especially when you’re holding a long position (I’ve assumed that you hold a buy). Also note that the entry and exit prices in options trading should be decided by the price of the underlying but not the option price itself.

Below is our suggestion for you.

With just two days remaining for expiry of Nov 10th options, one day of sideways movement in the index can drastically deplete the value. So, holding Nov 10th 18350 CE is a make-or-break trade. Therefore, if your option price opens at or above your purchase price on Wednesday, exit the option and buy a monthly option (opt for at-the-money or near to at-the-money strike). That gives you a good time to play out the potential rally to 18,550. Again, if you had mentioned your purchase price, it would have been better for us to give the advice.

In case, if Wednesday’s open price is below your purchase price i.e., if you’re at a loss at session open, you can probably wait till 12 noon or 1 pm for a recovery. Exit if the Nifty 50 hits 18,350. But if there isn’t any rally until afternoon, it is better to exit the option irrespective of the price and go long on the monthly option.

Send your queries to derivatives@thehindu.co.in

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