I want to buy January expiry 900-call option on CONCOR? Share your view on this? – Yogesh
Concor (₹904): The stock of Container Corporation of India (Concor) has broken out of a resistance at ₹875 this week, opening the door for the rally to extend. The broader trend is also bullish and so, the probability of further appreciation is high.
The chart hints that the share price of Concor could hit ₹950 in the near-term. The upside could even extend to ₹1,000. From the current level, the stock has its nearest support at ₹875. Subsequent support is at ₹850. Below this is another base at ₹800. As long as the stock remains above ₹800, the trend will be bullish.
Given the above conditions, you can buy the call option and it is right to buy an at-the-money (ATM) strike. Also, the ₹900 is a round number and so, the liquidity risk is very low. The January expiry 900-call option is now trading around ₹33. As the lot size is 1,000 shares, the outflow will be ₹33,000.
We suggest placing the stop-loss in options based on the price of the underlying, especially when you go long on plain vanilla options.
So, buy 900-call now at around ₹33. Book profits when the underlying price touches ₹950. On the other hand, exit when the stock slips below the support at ₹875. Because a fall below ₹875 can result in CONCOR’s price softening to ₹850 even though the trend is bullish.
Such a corrective move can negatively impact your position in two ways. One, the option premium will drop and two, the potential rally to ₹950 will be delayed.
But if the stock price fails to cross ₹950 by third week of January and if it remains above ₹850, consider rolling over from January to February series and exit when the stock price hits ₹950.
Send your queries to derivatives@thehindu.co.in