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Is it advisable to buy Coal India 470-PE of June expiry now? – Hetal
Coal India (₹488): The stock has recovered well post a sharp fall in the first week of this month. But at the moment, it seems to have lost momentum and has been trading flat over the past few sessions.
That said, there are no signs of a decline now. As it stands, there is a good chance for the stock of Coal India to consolidate between ₹475 and ₹500. So, for us to get a strong clue about the next leg of trend, the stock ought to move out of this range.
A breakout of ₹500 can lift the stock to ₹525 quickly. On the other hand, if the stock breaks below the support at ₹475, it can depreciate to ₹465, a support. Subsequent support is at ₹450. Notably, below ₹475, the next support comes soon at ₹465.
Given the prevailing conditions, it may not be a good idea to buy a put option. Even call options are not advisable at the current market price for the same reason of a potential sideways movement henceforth.
Consider buying put option if the stock breaks below the support at ₹475. Liquidate this when the underlying’s price falls to ₹460.
But in case Coal India’s stock surpasses ₹500, consider going long on the call option. Exit this one the stock hits ₹525.
We suggest considering the at-the-money July option rather than June contracts as they will expire next week. So, going ahead, time decay can weigh on the premium of June contracts.
Send your queries to derivatives@thehindu.co.in
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