I had bought Bank Nifty 48200-call at ₹720 and Nifty 21800-call at ₹380 for 11 January expiry. Should I hold and exit? – Amit

Bank Nifty (47,850): The trend is bullish for Bank Nifty. However, it has moderated over the past couple of sessions. It has its nearest support at 47,800 and thus, it is safe to assume that the bulls are in the driving seat. Therefore, you can retain the long position on 48200-call on Bank Nifty. Exit this trade when the index hits 49,000 as there might be a minor dip in price post the index reaching this level.

Nevertheless, if Bank Nifty slips below 47,800, it can quickly drop to 47,400- or even to 47,000. So, exit the call option long when the index breaches the support at 47,800. Although such a break is unlikely to turn the trend bearish in the short-term, it can possibly prolong the rally beyond 48,200 which is not ideal for a call option buyer. The reason being the time decay.

Nifty 50 (21,580):Nifty is in a bull trend. Although it has seen a decline in the early trade today, it has a good support at 21,500. Until 21,500 stays true, the bulls will have an upper hand. So, you can hold the 21800-call option on Nifty that you have bought.

But exit the call if Nifty 50 slips below the support at 21,500. Because a breach of 21,500 can trigger a fall to 21,300 which will extend the potential rally to 21,800 before the contract expires on January 11.

For both Bank Nifty and Nifty, if the index consolidates until the end of this week, consider exiting your existing call and buy January monthly expiry. Prefer at-the-money call option. Liquidate Nifty call at the prevailing price when the index rallies to 22,200 and exit Bank Nifty call if it touches 49,000.

Send your queries to derivatives@thehindu.co.in

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