Nifty weekly expiry: Kotak suggests short strangle; check trade setup, target, stop loss

Indian benchmark indices have witnessed a smart recovery in the last few sessions as geopolitical concerns eased, supporting crude oil prices, which are hovering around $72 per barrel. Thanks to buying in select heavyweight pockets, the broader tone remained positive, with investors awaiting fresh domestic and global triggers.

Sahaj Agrawal, Head of Derivatives Research at Kotak Securities, believes that the momentum remains intact but has now turned overbought. Following a positive reversal from the 23,830 zone last week, Nifty has extended its recovery towards the 24,450 mark, he said.

"However, short-term hourly oscillators have entered overstretched territory, while the Put-Call Ratio (PCR) has also climbed to around 1.48, suggesting that the pace of the recent rally could moderate. Although the broader trend remains constructive, the index could witness consolidation after the sharp rebound," Agrawal said.

"For today's weekly expiry, immediate resistance is placed in the 24,550–24,850 zone, which coincides with a significant volume cluster formed over the past few months and is likely to act as an overhead supply area. On the downside, immediate support is seen between 24,200 and 24,050, followed by the crucial 23,830 level. Unless 24,200 is breached, the possibility of any meaningful downside remains limited," he added.

To recall, the Nifty50 settled at 24,430.35, rising 159.50 points, or 0.66 per cent, on Monday. The Nifty Bank index rose 353 points, or 0.61 per cent, to end the session at 58,291.50, while the volatility gauge, India VIX, rose marginally by nearly 0.15 per cent to 11.82.

The analysts believe that the open interest (OI) build-up remains heavily concentrated at the 24,500 Call strike and the 24,300/24,000 Put strikes in the derivatives segment. Overall, the combined technical and derivatives data suggest a trading range of 24,200–24,600 for today's expiry, with both extremes likely to hold on a closing basis.

To play the July 07 monthly expiry of the July series, Agrawal has suggested following a Nifty short strangle strategy. He has suggested selling the 24,600 Call option and selling the 24,100 Put option on the Nifty50, which will result in an inflow of Rs 15.5. He has suggested a strict stop-loss of Rs 31, with a target of the entire premium.