I’m holding one lot of HDFC Bank 1460CE (March expiry). Bought it for ₹21.15 last Thursday. My target is ₹35. Should I hold it till the end of expiry? Or exit at a minimum loss? What should be the target and stop-loss? – Sandesh Karande

HDFC Bank (₹1,440): The stock of HDFC Bank depreciated over the past few sessions. It fell off ₹1,470, a resistance, last week. The 50-day moving average coincides at ₹1,470 making it a considerable barrier.

At the same time, the stock, currently hovering around ₹1440, has a support at ₹1,435. So, effectively, HDFC Bank is now stuck between the resistance at ₹1,470 and the support at ₹1,435.

Since the stock is now trading above a support, there is a good chance for a rebound in price. But that could be capped at ₹1,470. If the bulls can lift the price above ₹1,470, we can see a rally to ₹1,500.

While a rally to ₹1,500 cannot be ruled out, it is uncertain whether that will occur before the March contract expires. Given the prevailing circumstances, below is our recommendation.

Hold 1460-CE. Liquidate this when the underlying stock price hits the resistance at ₹1,470. On a rally to ₹1,470, the option premium of 1460-CE is likely to be in the range of ₹26-28. After exiting, you can consider buying April expiry call options after the stock breaks out of ₹1,470.

But if the stock declines from the current level and slips below ₹1,435, it will open the door for further fall. So, exit 1460-CE long when the share price drops below the support at ₹1,435.

If neither the rally to ₹1,470 nor a breach of the support at ₹1,435 happens before the end of this week, consider exiting the call long. As a prolonged movement within a range can result in time decay, leading to a drop in option premium.

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