Navigating expiry | Nifty hits record high; option strategies for bull view and cautious outlook

NSE Nifty 50 hit a new all-time high on May 23, surging above 22,800

NSE Nifty 50 hit a new all-time high on May 23, climbing above 22,800 for the first time and breaking through a key resistance level ahead of the weekly options expiry. The benchmark index gradually rose through a volatile past week. Analysts are divided on whether Nifty will extend gains or face selling pressure at these high levels.

Rahul Ghose, CEO of Hedged.in, said that Nifty’s uptrend will likely sustain, as the index is getting support from a rise in the banking stocks. “The next target for Nifty right now is 23,050, and since Bank Nifty is playing catch-up today, the trend looks to be sustaining,” said Ghose.

Expiry strategy recommended by Rahul Ghose: Bullish view

With the Nifty breaking through its resistance level, and option writers aggressively selling put options, one can plan a bullish strategy for the last few hours of expiry. This trade can be entered when Nifty is trading between 22,820 and 22,850.

The strategy: Nifty Broken Wing Short Straddle

- Sell Nifty 22,800 CE (call option) 23rd May expiry

- Sell Nifty 22,800 PE (put option) 23rd May expiry

- Buy Nifty 22,850 CE (call option) 23rd May expiry

This strategy will make money if Nifty stays above 22,750 for today's expiry.

Capital Required: Rs 78,000

Modifications: No modifications are required if Nifty trades above 22,750. If Nifty breaks below 22,750, traders can buy 22,750 PE to hedge the trade on the downside.

Risk on the trade: Rs 1,800 per set

However, Avdhut Bagkar, Derivatives & Technical Analyst at StoxBox, has a different view for the expiry day: “We anticipate selling pressure around 22,850, where risk-taking traders may opt for shorting 22,900 CE around Rs 45 and simultaneously shorting 22,750 PE at Rs 45, to capitalise on the sharp rally that began in the morning session.”

While the Nifty 50 hitting a new high has opened fresh upside for the following sessions. But, the index must close aggressively over 22,850 for the next uptrend. “The highest open interest can be seen in 23,000 CE, while on the downside, 22,700 PE also faces writing pressure,” said Bagkar.

Strategy recommendation by Bagkar: Short Strangle in Nifty (View: Profit Booking to Follow)

- SELL 22,900 CE around Rs 45

- SELL 22,750 PE at Rs 45

Total Inflow: Rs 90

Stop Loss: Rs 150

Target: Re 1

Riyank Arora- Technical analyst at Mehta Equities has a similar view, he believes that, "With the anchor VWAP major support placed at the 22,731 mark and immediate support, as per price action, at the 22,800 mark, the benchmark index has surged beyond its all-time high but is facing selling pressure at higher levels."

At present levels, he advises a bear-put spread with the following strikes to be considered from an options buying perspective:

Strategy recommended by Riyank Arora- (View: Profit Booking to Follow)

- Buy 1 lot  30 MAY 2024 22900 PE - Rs 183.95
- Sell 1 lot  30 MAY 2024 22650 PE - Rs 89.50

Max Profit: Rs 3,889
Max Loss: Rs 2,361
Max RR Ratio: 1.65
Breakeven: Rs 22,805.0

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