I bought May Nifty 19000 CE for ₹19. Shall I hold this till expiry? Also, suggest a short-term options strategy for Bank Nifty.

Manoj P S

Nifty 50 (17,624): The index, which began rallying towards the end of March on the back of the support at 17,000, hit a hurdle at 17,850 last week. It fell off that level and it closed at 17,624 last Friday. There are chances for the index to stay sideways in the next one or two weeks, post which there might be a recovery. We might see the index moving above 18,000 and touch 18,125. But whether the index will rally to 19,000 within May expiry is still a doubt. It might take longer than that.

Considering the above factors, we advise you to exit the 19000-strike call and buy a lower strike call, preferably 17,800 or 18,000. Yes, the premium will be higher, and you have to shell out more capital. Yet, that will considerably increase the probability of you making profits.

But note that the short-term bullish bias can be negated if the index falls below the support at 17,500. In such a case, we suggest exiting the long call options.

Nifty Bank (42,118): Like the benchmark index, Nifty Bank has also been rallying since the final week of March. But last week, it lost momentum and was stuck in a range. The price action indicates that the index might stay sideways or see a minor decline from here before witnessing a potential rally. The decline can take the index to the 41,500-41,800 range.

Therefore, for the week ahead, you can consider strategies that can accommodate a sideways movement with a bearish bias. Bear call spread is what we suggest for this week. This can be executed by selling 42600-strike call (₹87.3) and simultaneously buying 43000-strike call (₹29.3). Both are April expiry contracts.

You can consider taking long calls when there are signs of the index resuming the rally. Keep tab of our F&O Tracker column where we suggest F&O strategies for both Nifty 50 and Nifty Bank.

Send your queries to derivatives@thehindu.co.in

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