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I have the following contracts in my portfolio: Nifty 17500-CE Mar 2023 expiry, HAL 2900-CE Mar 2023 expiry and L&T 2220-CE MAR 2023 expiry. Kindly advise – Naresh
Nifty 50 (17,107): The support at 16,850 has held well, at least for now, as the index has rebounded. Until this support stays true, the bulls have a chance to fight back. That said, since you are holding a long call option, time decay can be a problem. While there is a good chance for the index to rally from here, whether it can surpass 17,500 before March expiry i.e., March 29 is less likely. So, if the underlying index does not break out of 17,200 in the next couple of sessions, you can liquidate the 17,500-call option that you are holding now. After exiting, consider buying call option (preferably April expiry) or futures long if the index breaks out of 17,200.
HAL (₹2,656): The trend in stock of Hindustan Aeronautics Limited (HAL) is bullish and the recent fall can be counted only as a corrective decline. The outlook will become weak only if the price declines below the support at ₹2,250. But because you hold an option that will expire next week, what you need is a quick recovery from the current level. Even then, a move beyond ₹2,900 before current expiry is less likely. On the other hand, a break below ₹2,600 can drag the stock to ₹2,520. In any case, the risk is higher for you. Hence, exit the option now.
Read more: Cabinet nod to buy 70 basic trainer aircraft from HAL for ₹6,800 cr
L&T (₹2,207): The stock of Larsen & Toubro (L&T) has been rising since the beginning of this month. It is now facing a barrier at ₹2,225 though. Yet, the price action shows more room for a rally. So, you can take bullish bets. However, we would suggest to roll-over your call option long from March to April expiry. The outflow will increase, but this will give you time until the up move plays out in the stock.
Read also: L&T’s Patil says substantial defence business opportunities ahead
Remember that stock options are not cash settled but compulsory delivery if they end up being in-the-money (ITM). This will result in a huge margin requirement. So, unless you intend to take delivery of the underlying stocks, be sure to exit your call options before expiry if they become ITM.
And, have risk-management measures in place and always have an exit plan when you trade, especially in futures and options.
Send your queries to derivatives@thehindu.co.in
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