Loss of Rs 6.63 Lakh due to covered call in HDFC Ltd

[Michael Gonsalves]

I have sold 6000 2540CE Calls in HDFC Ltd for Rs 16.55 each. Today, the stock surged nearly 6% to Rs 2650. This was because the DOW had surged 900 points (3%) yesterday because inflation is falling. Also, news came in that under the amended MSCI M&A RULES, HDFC, HDFC BANK Merged entity can see double the current MSCI weight. MSCI Weight post merger can go from 5.78% to 13%. Adjustment factor of 1x applicable instead of 0.5x.

https://twitter.com/YatinMota/status/1590940849302802434

The result is that I am bleeding profusely from the short calls.

I have the stock in my portfolio and will give delivery in case adjustment is not feasible.

[Michael Gonsalves]

I didn't want to give delivery as the stock is worth keeping and there would be a liability for capital gains tax in case I delivered it. So, I covered the position and absorbed the loss. I have sold Calls and Puts and hope to recover the loss in the next few months.