Some one has recommended this to me
BHARAT FORGE 18 SEP 720 CE @ avg price 12.70
currently it is @ 6.70
it make me loss of -7200 but i am holding it
Please tell me should i hold it or book loss??
I dont know anything about this stock
But in general, I see its upmove started from July 19, full August it was up.
So buying call option in September is a bad trade, unless there is some big news which will cause it to keep on going up.
Also Nifty has been weak last 2-3 days, if Nifty weakness continues in September, the stock rising to 720 is all the more difficult.
Rest you decide, again I said I never tracked this stock, but given generic comments.
Stock options mostly do turn out to be waste of money
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You have bought an OTM (out-of-money) CE that is almost 10% farther from current price ( as I write Bharat Forge is trading at 671). As a general rule in options trading, it is never a good idea to buy an OTM CE, as the move in OTM ce , in this case, 720 CE may not be directly proportional to the move in underlying stock. So, it might happen that the stock moves 5% in coming week, but the 720 CE may not gather the same value and instead fall in price.
It happens coz OTM options have ONLY time value in it which depreciates with each passing day.
Also , important is the directional strength in the underlying stock. Bharat Forge is not looking very strong , and below 663 your CE option may further depreciate in value. For your position, you may put a stop loss at 562 and may consider exiting if this levels breaks.
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