The Nifty50 index saw a decline on Monday, settling lower due to profit booking. Despite extending its recovery towards the 24,360 mark in the current series after a positive reversal from the 24,000 zone last week, the index retraced to the 24,145 level. Market experts view such pullbacks as healthy consolidation rather than a trend reversal, maintaining a bullish short-term outlook as long as key support levels remain intact.
Kotak Securities' Strategy for Weekly Expiry
For the upcoming weekly expiry, Sahaj Agrawal, Head of Derivatives Research at Kotak Securities, has outlined crucial levels and a recommended options strategy. He identifies immediate support for Nifty at the 24,100–24,000 zone. Resistance is projected at 24,350, followed by 24,500. Agrawal emphasizes that a significant downside is unlikely unless the 24,000 level is breached on a closing basis.
The overhead resistance zone is expected to limit aggressive buying, suggesting the Nifty will likely trade within a defined range. Derivatives data indicates heavy open interest concentration at the 24,300 Call strike and 24,200 Put strike, reflecting a balanced positioning among option writers around current market levels.
Recommended Short Strangle Strategy
Based on technical and derivatives data, a trading range of 24,000–24,400 is anticipated for tomorrow's expiry, with both extremes expected to hold on a closing basis. A range-bound session could favor option-selling strategies as time decay (Theta) accelerates closer to expiry.
Given this setup, Kotak Securities suggests traders consider deploying a short strangle strategy. This involves selling a 24,500 call and a 23,950 put, with an estimated inflow of 19.40. A stop loss for this strategy is advised at Rs 38, while the target is to capture the entire premium decay.
Market Context: Nifty Bank and India VIX
On Monday, the Nifty50 closed at 24,238.50, down 95.80 points (0.39%). The Nifty Bank index also saw a significant drop, tanking 576.40 points (0.98%) to end the session at 57,945.00. Meanwhile, the India VIX, a measure of market volatility, tumbled nearly 1.29% to 12.98 levels.