Can NIFTY50 hold the 22,500 support on monthly expiry?
Understanding the NIFTY50’s Tilt towards 22,500 Support
The NIFTY50 has been in a downward spiral for six consecutive days, and as of February 25th, it closed flat, creating a hopeful atmosphere for bulls and bears alike. The index is poised precariously close to the crucial 22,500 support level, raising questions about its ability to hold on. In this article, we’ll delve into the world of options and explore the possible scenarios for the NIFTY50’s next move.
Intraday Analysis: Can NIFTY50 Hold the 22,500 Support?
As of now, the NIFTY50 is trading near the immediate support zone of 22,500, having broken the six-day consolidation and slipped below the support zone of 22,700-22,800. This support zone will now act as immediate resistance.
Options Build-up: What’s the Picture?
The open interest (OI) data for the February 27th expiry shows significant call build-up at 22,700, indicating resistance for the index around this level. On the other hand, the put base is observed at 22,600 and 22,500, pointing to support for the index around these levels. Additionally, the 22,600 call and put options have witnessed substantial OI build-up, suggesting range-bound activity around this level.
Bullish Outlook: Will NIFTY50 Break Out?
Traders looking for a breakout above the downward-sloping trendline on the 15-minute chart, followed by a close above 22,800, can consider a long call strategy. If the NIFTY50 closes above 22,800, it would mark a significant shift in market dynamics.
Bearish Outlook: Will NIFTY50 Test 22,500?
On the flip side, if the NIFTY50 breaks the immediate support zone of 22,500, traders can consider a long put strategy to capitalize on the bearish outlook. Buying an ATM put option with a 22,550 strike price would set the breakeven point at 22,502, making the strategy profitable if the index declines by 0.2%.
Range-Bound Outlook: Will NIFTY50 Remain Stagnant?
Traders anticipating a range-bound movement, with options build-up and base around 22,600, can plan an iron condor strategy. If the underlying price remains stable and between the short put and short call strike prices, they’ll earn maximum profit.
Conclusion: Can NIFTY50 Hold the 22,500 Support?
In simple terms, options offer flexibility to navigate different market conditions – bullish, bearish, or range-bound. However, it’s essential to assess the risks and have a clear plan for managing potential losses. As the NIFTY50 teeters on the edge of the 22,500 support, it’s crucial to analyze the situation carefully and made informed decisions.
Disclaimer:
Derivatives trading should be done only by traders who fully understand the associated risks and strictly apply risk management techniques like stop-losses. The information provided is for educational purposes only. It’s essential to consider the risks and devise a personal plan for managing potential losses. The stock names mentioned are for illustration purposes only; in no way should you invest based on this information.
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