We're at our ATH right now on Nifty. Also given a huge Gap Up on Friday after the monthly expiry of May, I'm still afraid of profit booking and a downward fall before we continue to edge higher. To play is save, I feel for a short strangle (or an Iron Condor) a safe range for Monday (31st May) would be 15300 - 15650.
Base Trade - 15300 PE - 15650 CE
I'm hoping this 350 point strangle should have a little more than 40 - 45 points in them and I'm looking to capture around 8 - 10 points of decay.
Reasons behind 15300 support
We've a very good support (OI) built up at 15400 and 15300. Even if we breach 15400, I feel 15300 would be still defended this week. We might change our view as the week progresses.
Reasons behind 15640 resistance
Even after a huge gap up and rapid buying by both FII and DII, we made close to 140 point jump. I don't expect the 200 point difference to be taken out intraday.
Possible adjustments
We'll move our CE down if we start heading towards 15400. Similarly if we will move our PE up once we cross 15500. Also if we gap up again on Monday cross over 15500 and not getting sold into in the first 15 minutes, then we'll probably start directly with 15350 instead of 15300 in the base trade.
SL
The plan is not to loose more than 8 points on a Monday, since the decay isn't so great especially when we don't have any overnight positions.
Chart
(Click to view the chart enlarged)
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