Which derivative strategy to use to trade Nifty’s monthly expiry today?

The Indian equity benchmark opened higher on March 28, with the Nifty trading at around 22,188.80 on the monthly expiry day, up by 65.15 points from the previous close. Over the past week, the index has been trading sideways with a bullish undertone.

Here is how Rahul Ghose, a derivatives expert and founder of Hedged.in, is positioning the Nifty for the expiry day:

“Expiries are generally considered a challenging time to form strategies,  the current texture of the market is sideways with a tinge of bullish bias. Keeping this undercurrent in mind, we have planned a short straddle with safe offsets that act as a hedge, ” Ghose said.

Ghose’s pick: Broken wing Short Straddle

When to Initiate the strategy:

This strategy should be initiated when the Nifty is between 22,250 and 22,300 .

The Strategy : Broken wing Short Straddle

(-)Nifty 22300 CE 28th March Expiry
(-)Nifty 22300 PE 28th March Expiry
(+)Nifty 22250 PE 28th March Expiry

When will this strategy make money?

This is a unique strategy that will make money if the Nifty stays flat, goes down as well as it it goes up 100 points up

Maximum loss and Modifications:

When Nifty crosses the upper breakeven point which should be somewhere around 22,400, look to sell the 22,400 PE to get some additional credit. This will move the breakeven.

When to exit the trade?

If Nifty crosses 22,450, exit the entire trade. The maximum loss will depend on the time of the day and can be approximately 20-50 points (Rs 1000 – Rs 2500)

One should only to enter the trade when the Nifty trades in the range mentioned above and also check if any news is expected during the day, he said.

Possible Targets

1 percent of capital as the trade is Intraday and is relatively low risk

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