I have the following contracts in my portfolio: Nifty 18000-CE DEC 2023 expiry, Nifty 19000-CE DEC 2023 expiry, Nifty 17000-CE DEC 2023 expiry, and Reliance 2400-CE APR expiry. Kindly advise.

Vikas Rawat

Nifty 50 (16,986): The Nifty 50 index is hovering above a support at 16,850 which is critical from the medium-term trend perspective. If Nifty 50 rebounds strongly, it can rally back to 18,200 – a resistance level. Subsequent resistance is at 18,800. However, if the support at 16,850 is invalidated, there will be a shift in the medium-term trend to bearish. This will open the door for a deeper fall to 15,800-16,000 range.

Since you have bought farther expiry options, I assume that you’re a medium-term to long-term trader. Here’s our recommendation: Hold the options for now and see whether the support at 16,850 holds. If the index rebounds from this level and rallies, exit the options at the prevailing price when the index hits 18,200. Thereafter, if there is a breakout of 18,200, consider buying call options again for a target of 18,800.

On the other hand, if the index slips below 16,850, liquidate the options. Because as mentioned above, a fall below the support at 16,850 can intensify the sell-off, leading to a sharp drop in option prices.

In fact, if there is a breach of the support at 16,850, you can consider buying put options or even short Nifty futures contract. For medium-to-long term trades, futures might work out well, as it does not suffer from time decay like options. One thing you must note here is that if you are trading in futures you must have adequate risk-management strategy and stick to stop loss rules.

Reliance Industries (₹2,226): You can hold the call option on Reliance Industries for three reasons.

One, the stock is now trading near a considerable support level. This can arrest the fall and help the stock to rebound.

Two, the price of the option that you hold has dropped to around ₹30. There is not much value left, unless it is significant as a percentage of your trading capital.

Three, you have more than a month left before the option expires.

A possible recovery from here is likely to face its first hurdle at ₹2,300. A rally past this will be positive for the stock. A breakout of ₹2,300 can result in a swift up move towards ₹2,450.

After reaching ₹2,450, we might see some consolidation or even a minor correction. So, consider exiting the option at the going price when the stock touches ₹2,450. The quicker the stock appreciates to ₹2,450 the better.

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