Expiry trade: Use this iron butterfly strategy for low-risk intraday trade in Nifty

On April 4 expiry day, Nifty opened with a huge gap up but erased early gains and is now trading flat, close to 22430.

Given the massive gap up, the upward trend, and the lack of follow-through, here’s the strategy that could be employed for intraday expiry trading on Nifty:

Strategy recommended by Rahul Ghose, derivatives expert and CEO of Hedged.in:

The Strategy to employ : Out of money (OTM) Iron Butterfly
Sell Nifty 22,450 PE 04th April
Sell Nifty 22,450 CE 04th April
Buy Nifty 22,400 PE 04th April
Buy Nifty 22,500 CE 04th April

When will this strategy make money:
This strategy that will make money if Nifty stays below 22,500 for today’s expiry

Maximum loss and modifications :
When Nifty Goes below 22,370, You can additionally sell the 22450CE of today’s expiry. The maximum loss in the trade is Rs 2,000.

Possible Targets :
Traders could look at making gains of 1 to 1.25 percent of capital as the trade is intraday and is relatively low risk. Further, Rahul Ghose advises traders to be cautious rather than being overly bullish

Turn cautious rather than being overly bullish, says Rahul Ghose

According to Ghose, even though Nifty and Sensex have hit their all-time highs once again, the prevailing belief among many is that markets will break out from here as a new level has been crossed.

“It is crucial to recognise at this point that markets are slightly overvalued, and the stance should shift to being cautious rather than overly bullish. The upside potential of the market before elections will be limited from this level, and from a risk-to-reward perspective, it is advisable not to be aggressively long at this point,” said Ghose.

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