Nifty weekly expiry today: Kotak suggests short strangle strategy; key levels to watch

Nifty50 index settled lower on the back profit booking even as the benchmark index extended its recovery towards the 24,360 mark during the current series, following a positive reversal from the 24,000 zone last week. It retraced towards the 24,145 level as part of a counter-trend move on the hourly charts.

According to the market expects, such pullbacks after a sharp recovery are not unusual and appear to be more of a healthy consolidation rather than an indication of a trend reversal. As long as key support levels remain intact, the broader short-term structure continues to favor the bulls.

Sahaj Agrawal, Head of Derivatives Research at Kotak Securities sees the immediate support for this weekly expiry at 24,100–24,000 zone, while resistance is placed at 24,350, followed by 24,500. Unless the 24,000 level is breached on a closing basis, the possibility of any meaningful downside remains limited. The overhead resistance zone is expected to restrict aggressive buying, suggesting that it may continue to trade within a defined range, he said.

"In the derivatives segment, open Interest build-up remains heavily concentrated at the 24,300 Call strike and the 24,200 Put strike, reflecting a balanced positioning by option writers around the current market levels," it said.

To recall, the Nifty50 settled at24,238.50, falling 95.80 points, or 0.39 per cent, on Monday. The Nifty Bank index tanked 576.40 points, or 0.98 per cent, to end the session at 57,945.00, while the volatility gauge, India VIX, tumbled nearly 1.29 per cent to 12.98 levels.

Overall, the combined Technical and Derivatives data suggests a trading range of 24,000–24,400 for tomorrow's expiry, with both extremes likely to hold on a closing basis. A range-bound session could continue to favor option-selling strategies as time decay accelerates into expiry, noted the Kotak's analyst.

Given this setup, he has suggested traders to consider deploying a short strangle strategy to capitalize on accelerated Theta (time decay) during the final trading session before expiry. He has suggested to sell a 24,500 call and 23,950 put in Nifty with an tentative inflow of 19.40. Stop loss for the same is kept at Rs 38, while the entire premium decay is seen target as the target for the same.