Expiry trade setup for Feb 3: GIFT NIFTY indicates massive gap-up opening for NIFTY50 after India-US trade deal, will it sustain?

NIFTY50

Max call OI:25,500

Max put OI:24,800

(Ten strikes to ATM, 3rd Feb expiry)

The NIFTY50 is expected to post the sharpest gap-up in recent history on Tuesday after India and the US signed a trade deal. According to the new trade deal, the US has reduced overall tariffs on India to 18% from 25% earlier and also removed additional tariffs of 25% which were imposed for purchasing Russian oil. Following the announcement by President Trump and Prime Minister Narendra Modi, the GIFT NIFTY futures jumped nearly 600 points on Monday night. NIFTY50 is expected to open near 25,900 as indicated by GIFT NIFTY futures on Tuesday morning.

NIFTY50

On technical charts, the index went into a weak trade setup after closing the 25,000 levels and the 200 EMA levels. After Tuesday’s sharp opening, the index is expected to cross all the near-term moving averages levels of 20, 50 and 200 EMA levels on daily charts. Experts believe that the sharp gap-up opening is expected to see high volatility, with swings on both sides of the trade.

On the options data front, 25,500 calls held the highest open interest, which are expected to see massive covering on Tuesday morning. On the other hand, 24,800 puts held the highest open interest for today’s expiry, indicating a strong support.

Expiry outlook

After the initial gap-up opening, the index is expected to witness wild swings on the either side of the direction. Market participants should excersize utmost caution while trading on these types of days. Being an expiry day, the option premiums could witness sharp erosion in the prices.

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