F&O Query: Should you Buy or Sell Stock Derivatives?

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Can I buy the July expiry TCS 4100-strike call option?

Anil Kewalramani

Tata Consultancy Services (₹4,011.8): The stock of TCS (Tata Consultancy Services) has been in an uptrend since early June, after finding support at ₹3,600. But in the last few sessions, it has been flat. However, the broader trend is up, and we expect it to appreciate, potentially to ₹4,250 in the near future. That said, there is a chance that TCS might see a dip to ₹3,950 before the next leg of upswing.

So, we suggest buying 4100-strike call now at ₹51 and accumulate when the stock price drops to ₹3,950. The expected price of 4100-CE then could be between ₹30 and ₹32. Therefore, your average price would come around ₹42.

Exit half of your option holding at the prevailing price when the stock price rallies to ₹4,150. For the remaining half, keep stop-loss at the entry price. Exit the leftover when TCS’s stock price rises to ₹4,225.

Instead of appreciating if the stock declines and slips below ₹3,900, liquidate the options position. Because the breach of ₹3,900 can lead to a fresh leg of downswing.

I have a short position on Coforge July futures. I sold at ₹5,689.70. Should I exit or wait?

Palani S

Coforge (₹5,870.15): The stock of Coforge has been on an uptrend since May. Last week, it closed above a resistance at ₹5,800, opening the door for further rally. Therefore, Coforge July futures (₹5,859.45) is likely to go up from here.

But there is a slim chance for the contract to see a minor correction in price, possibly to ₹5,750 or to ₹5,650. Given the prevailing conditions, a decline below ₹5,650 is less likely.

Our recommendation will be to hold the position with a stop-loss at ₹5,900. But exit the short position at either ₹5,750 or ₹5,650, depending on how far the corrective move can stretch.

It is important for you to strictly adhere to the stop-loss mentioned above. Since the trend is up, a breakout of ₹5,900 can result in a quick rally to ₹6,300.

You might consider going long once the stop-loss of short futures is hit. Target and stop-loss can be at ₹6,300 and ₹5,750.

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