Is it better to sell an OOM-Put at a loss or wait till contract expiry to minimise losses?

It depends. First thing - there is no guarantee that losses will decrease by waiting till expiry.

Hold on if any/all of following are valid

  • There is a high probability of a strong correction in underlying stock price.

  • If the value of option is so less that selling it will cost more than its sell value. In addition to brokerage and other charges, STT will also be applicable since you will be selling.

Sell if

  • It is July option - it will start losing value very fast going forward due to time value erosion.

-Underlying instrument is in strong uptrend, trading range or may not correct as much.

So re-do your analysis of the underlying instrument, calculate sell value and charges if sold and then decide accordingly. But do not hold on just with hope of recovering losses - it is a losing strategy. Remember 1st goal of trading is capital preservation.

In case you decide to hold, then at the same time decide your exit points if price goes up and stop loss if the price goes down and then exit at that price.

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Never hold on a position hoping to recover or minimize losses. This is just trying your luck and if you intend to simply try your luck, then you rather gamble than trade. Hold on to this this position if you have a strong view else exit. Its more risky in options because for a buyer the time is always against him and the time decay will only reduce the premium. If you still want to take the risk then you rather hedge the position by writing Deep out of the money PUT. This will reduce your risk and if lucky, add to your profits too.

If you are damn sure, that markets will turn in your favor (trade favor), then you can hold. Or else simply come out. It is always good to EXIT, than wait.