I’ve bought 5 lots of 337.50-strike call options on Vedanta Limited for ₹5.25. Can I hold it up to expiry or exit with loss now? – Ravi

The 337.5-strike call option closed at ₹1.65 on Monday. There is not much value left to lose when compared to the premium at which you bought. So, you can hold your positions.

However, you should be prepared to see a bit more of a downside in the stock of Vedanta Limited (₹306.25). On Monday, it decisively closed below a support at ₹315 and looking at the hourly chart, we could observe a double-top chart pattern which stands confirmed. This pattern hints at a possible fall to ₹295. So, if there is a recovery coming, it could be after the stock testing the ₹295 support.

Another risk is that the stock might enter a consolidation phase after falling to ₹295, in which case, the option premium could fall further. If you wish to avoid this risk and also the risk of an extended fall below ₹295, you might exit the option now.

Nevertheless, our advice is to hold as the risk-reward at this juncture looks favourable to you.

In general, it is advised not to buy multiple lots in options. If you are a trader with a higher risk appetite, prefer index options. Or you can consider option selling with necessary risk management as the probability of success in selling is relatively higher. But again, avoid selling vanilla options (selling without hedging). Always hedge when it comes to option selling.

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