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I’m holding a 300-strike call option on Chambal Fertiliser. Kindly tell your view on the stock and what should I do with the option – Tarun K Chadha
I assume that you’re holding a long call option.
The stock of Chambal Fertilisers & Chemicals has been rallying for nearly two weeks. But note that at the current level of ₹305, it faces a falling trendline resistance. Also, the price action since mid-September shows that the stock has been forming lower highs and lower lows. So, the recent rally seems to be only a corrective one.
Remember, for the stock to turn the short-term trend bullish, it must decisively rally past ₹310. Coincidentally, the option chain shows that the 310-strike call has the highest number of outstanding open interest and thus, the broader expectation is that the stock is less likely to get over ₹310 before the end of December expiry. While this can change as we go ahead, the current scenario is not very encouraging to hold long call options on Chambal Fertilisers.
Therefore, we recommend liquidating the long call option now. Consider buying calls only after the stock breaking out of the resistance at ₹310. Because such a break can lift the stock to ₹330 quickly.
In case if you’re holding a short position on a 300-strike call, we suggest you exit this and instead sell 310-strike call afresh; hold till expiry. But exit as soon as the stock rallies above ₹310.
Send your queries to derivatives@thehindu.co.in
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