Aurobindo Pharma (₹738): This stock has been in a steady uptrend since early February. After falling in the preceding months, Aurobindo Pharma established a rally on the back of the support at ₹400 in the first week of February. 

The trend remains positive and as it stands, there are no signs of a bearish reversal on the daily, as well as the weekly chart. Currently trading at about ₹738, the stock shows potential to rally towards the nearest resistance at ₹770 in the near-term.

Considering the above factors, you may hold the 755-strike call option. You can retain both lots (i.e., 2,200 quantity).

Also read: F&O Strategy: Bull-call spread on Aurobindo Pharma

That said, you need to have a close watch on this going ahead. Because, next week is the third week of the month and hence, the options might experience higher time decay. Even a flat movement in the stock can result in a significant drop in the option premium.

So, it is advisable to exit your position the moment the stock touches the resistance at ₹770, irrespective of the price of the option.

After you exit, if the stock continues to rally and breaches the resistance at ₹770, you can consider buying the call options again. But this time, opt for next month expiry so that you will have lesser time decay risk.

Also read: F&O Tracker: Data hints at a blip before next upswing

The strike price can be chosen based on your risk appetite. That said, do not buy far out-of-the-money (OTM) options. The cost of those options may be lower but the probability of you making money will also be lower.

In case the stock fails to appreciate to ₹770 before the end of next week i.e., July 21, it is better to exit or roll over to the next month contract.

In any case, once the stock hits ₹770, make an exit and re-enter after the barrier at ₹770 is breached. A breakout of this resistance can lead to a rally to ₹820, the immediate notable resistance above ₹770.

Send your queries to derivatives@thehindu.co.in

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