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I have bought the March 9 expiry 17800 call option on Nifty 50 for ₹51. The value dropped to ₹26 on Monday. Please suggest if I can hold this position till expiry. Will the premium recover to ₹51 or above? – Kishore
The Nifty 50 index, which began the week with a gap-up, showed promise of a strong rally. However, it lost momentum after the index faced resistance at 17,800. Now, the price action indicates that there is a possibility of the index staying sideways.
The option is now down to ₹14. Given that you hold a weekly option and only two sessions are left, including today, you’re at a risk of losing more.
However, the remaining value in the option position is ₹700 (₹14*50 i.e., the option premium multiplied by Nifty’s lot size). So, if you can afford this loss, you can take the risk of holding till expiry, i.e., till the end of the session tomorrow.
But if you hold too many lots and the potential for loss is more as a percentage of your total trading capital, you may exit.
After exiting, you can consider buying call options if the Nifty breaks out of resistance at ₹17,800. But always go for monthly expiry to buy yourself more time to stay in the game. Because, predicting that direction is possible with certain techniques, but predicting how much time a security will take to reach a particular price is very difficult.
With weekly options, unless you get the timing right, the chance of losing is high.
Send your queries to derivatives@thehindu.co.in
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