I had bought the February expiry 380-strike call option on ITC for ₹8.75. Should I hold or sell? What is your suggestion and target? – Subhash

The stock of ITC (₹380) is ruling at record levels after witnessing a sharp rally in the past few trading sessions. Since the stock has broken out afresh, we expect it to carry the momentum in the coming days leading to more appreciation. Hence, our suggestion is to hold the 380-strike call option.

When writing this response, the option was trading at the levels at which you bought. However, as with any rally, we might see a correction in price, most likely in the early part of next week where the underlying stock could retest the resistance-turned-support level of ₹360. This might lead to a drop in premium. Nonetheless, we suggest holding on to the position as the stock will most probably resume the uptrend.

We expect ITC to hit ₹400-mark in the near-term. If the current momentum remains unfazed, the 380-call might reach ₹20-25 price band. The quicker the stock rallies, the sharper the rise in the option premium and vice-versa.

Overall, considering the above factors, retain the option. Although it is always better to place a stop-loss, in this case, you can hold without one as the maximum risk is already known. Yet, if you prefer to keep a stop-loss it can be at ₹2. On the upside, exit the position when the option premium rallies to ₹20.

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