I’m holding a call option on Indigo. The contract is 4800-call of March expiry. The purchase price is ₹65. What can be the target for this trade? Do you recommend holding till expiry? – Yugesh, Thane
InterGlobe Aviation (₹4,700.85): The stock has been in an uptrend since January. It started moving up after finding support at ₹4,000. After hitting a five-month high of ₹4,815.65 on March 7, it has now moderated to ₹4,700.
The chart shows that the uptrend is intact and it will remain so in the short term until the price is above ₹4,420. On the upside, there is a possibility for the stock to rally to ₹4,900 before the end of the current expiry.
Given the aforesaid factors, we suggest holding the 4800-strike call, which closed at ₹57.05 last week. Target can be ₹130.
That said, the recent price action hints that there is a resistance in formation at ₹4,780. So, in case the stock does not surpass this level before the end of this week, you can consider exiting the trade. Because, as the expiry nears, time decay of the option can intensify, leading to potential losses.
I’m considering buying a put option on Torrent Power. Is the outlook bearish? Which contract would you recommend? – Sai Adhitya, Bengaluru
Torrent Power (₹1,291.20): The stock has been in a steady downtrend since October last year. While there was some recovery in March, the price has moderated over the past couple of sessions.
The fall occurred on the back of the resistance at ₹1,360 where the 50-day moving average (DMA) lies. Notably, the stock has fallen off the price region between 20- and 50-DMA several times over the past few months.
Hence, the probability of the fall appears high. However, the price action also hints at a loss in downward momentum. Therefore, it is advisable to buy put options only for the short-term.
We suggest buying 1280-put of March expiry, whose premium closed at ₹30.30 last week. Target can be ₹90. In case the target is not hit until the end of this week, exit the trade.
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