Nifty trading strategy, June 6: Use 'Short Strangle' strategy to capitalise

Nifty trading strategy: With a likely trading range mentioned above for the coming week, a Short Strangle strategy could be an effective way to capitalize on expected consolidation

Recommended strategy:

• Strategy: Nifty Short Strangle
• Expiry: 12-Jun-2025
• Strike Prices: Sell 24,000 Put and Sell 25,500 Call
• Net Premium Inflow: 33.55 points
• Stop Loss: 65
• Target: Entire Premium Inflow

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Rationale:

• Nifty is consolidating within a defined range of 24,500–25,100, despite being in a broader uptrend.
• Broader markets have outperformed Nifty in recent weeks, indicating potential for a near-term cool-off phase outside the index.
• Without the support from the broader markets, a breakout in Nifty on either direction is unlikely in the immediate term.
• Strategy View: With a likely trading range mentioned above for the coming week, a Short Strangle strategy could be an effective way to capitalize on expected consolidation.
• This strategy is profitable if the market remains in a tight range, benefiting from both volatility contraction and Theta decay.

(Disclaimer: This article is by Sahaj Agrawal, senior vice president, head of derivatives research, Kotak Securities. View expressed are his own.)