Expiry trade setup: Will NIFTY50 hold the support of 23,000 on expiry day? Here's all you need to know

NIFTY50

Max call OI:23,500

Max put OI:23,200 (Ten strikes to the ATM, 3rd April Expiry)

NIFTY50 recouped partial losses of Tuesday by gaining nearly 170 points on Wednesday. The gains on Wednesday were primarily driven by banking and IT stocks like HDFC Bank, ICICI Bank, Infosys, Bharti Airtel and more. Despite the gains, cautiousness prevailed among investors amid uncertainty over tariff announcements.

On the technical charts, the index defended the 20 and 50 EMA levels on daily charts. Similarly, it formed an inside bar, indicating the strong undercurrent of buying at lower levels.

On an intraday basis, the index witnessed a sustained rally throughout the day and closed above the 50 EMA. Moreover, the intraday charts also signalled a probable positive crossover of 20 EMA crossing 50 EMA from below. The index faces resistance at 23,450-500 levels, beyond which the rally towards the nearest swing high of 23,869 could be possible. Similarly, an opening below 23,150 levels could signal further weakness in the markets

On the options front, the 23,500 strike price indicates a strong resistance with the highest open interest (OI) for the current expiry. On the downside, the 23,200 strike price witnessed strong OI addition on Wednesday and also holds the highest open interest, indicating a strong support for tomorrow's expiry.

Bullish outlook

Traders anticipating a bullish outlook for tomorrow’s expiry can consider doing a long call strategy to capitalise on the bullish trend. Buying an ATM (At the money) call option of 23,300 would set the breakeven at 23,380, which means an 0.2% upside move in the NIFTY50 on the upside could turn the strategy profitable.

Bearish outlook

Traders anticipating a bearish outlook for tomorrow’s expiry can consider doing a long put strategy. Buying an ATM put option of 23,350 would set breakeven at 23,257. This means a 0.37% downside move from the current level could turn the strategy profitable.

Conclusion

Despite the current setup tilting towards the bullish side, extreme volatility cannot be ruled out on the expiry day. Traders are advised to make a note of this.In simple terms, a long call strategy allows traders to take advantage of rising prices, while a long put takes advantage of falling prices. Options offer the flexibility to navigate different market conditions - bullish, bearish or range-bound. However, past performance isn't a guarantee of future results. Before implementing any strategy, it's important to assess the risks and have a clear plan for managing potential losses.

Disclaimer: Derivatives trading must be done only by traders who fully understand the risks associated with it and strictly apply risk mechanisms like stop-losses. The information is only for educational purposes. We do not recommend any particular stock, securities or strategies for trading. The stock names mentioned in this article are purely for showing how to do analysis. Make your own decision before investing.