I have bought one lot of Sun Pharmaceutical 1800-put option for ₹29.85. Also, I bought two lots of HUDCO 215-put option for an average price of ₹6.6. Both are January expiries. What should be my target and stop-loss for these positions? – Anish Das
Sun Pharmaceutical Industries (₹1,786.55): The stock, which has been on a decline since the beginning of this year, has now found support at ₹1,740.
Although Sun Pharma will carry some bearish bias until it trades below ₹1,830, the support at ₹1,740 might at least arrest the fall if not help in a recovery. But a rise to the nearest resistance at ₹1,830 is still possible.
If such a move occurs within a week from now, the premium of 1800-put can depreciate to approximately ₹12.
Given the current conditions, you can either exit the trade at the current level with a profit (as the premium is now at ₹34.15) or place a stop-loss at ₹10 and hold the trade for a week. Target can be ₹48.
HUDCO (₹234.8): The stock bounced off the support at ₹200 last week. Currently trading at around ₹235, it faces a barrier at ₹250. Also, 240-strike call has seen a good amount of selling. Therefore, this is also a potential resistance.
That said, even if the fall resumes on the back of the resistance at ₹235, it might not lead to a breach of the support at ₹200 before the end of the current expiry.
However, if the resistance at ₹250 is breached, we can expect another leg of a rally, which can take the stock to ₹280 in the near-term. On the other hand, a break below ₹200 can lead to a fall to ₹170.
Considering the aforesaid factors, you may hold 215-put option, whose premium stood at ₹2.35 on Friday. But place a stop-loss at 0.90. In case the premium goes up, exit one lot at ₹8 and liquidate another lot at ₹12. So that the average exit price will be ₹10.
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