Nifty 50 Intraday Prediction for 7th Aug :
Option Trading Strategy
This report provides a detailed analysis of the Nifty 50 index’s expected intraday movement on August 7, 2025, starting from the current level of 24,530, and recommends an option trading strategy for a high-risk approach. The analysis combines technical analysis, fundamental analysis, and real-time news sentiment to estimate probabilities for the index finishing higher, lower, or in a volatile state. It also evaluates the expected returns for buying near At-The-Money (ATM) call and put options for intraday trading between 9:30 AM and 3:00 PM IST, with the Aug monthly expiry (August 28, 2025).
Intraday Probability Estimates for Nifty 50 Movement
The following probabilities are estimated based on a synthesis of technical indicators, fundamental factors, and real-time market sentiment:
Market Outcome | Probability (%) | Key Drivers |
|---|---|---|
Upside (Higher Close) | 30% | Potential breakout above resistance at 25,590, short-covering rallies, consolidation at higher levels. |
Downside (Lower Close) | 50% | Bearish sentiment, global trade concerns (e.g., U.S. tariffs on India), sectoral weaknesses (textiles, jewelry). |
Volatile Market | 20% | Mixed analyst predictions, potential for sharp moves due to global uncertainties. |
Technical Analysis
- Candlestick Patterns and Intraday Indicators: The Nifty 50 is consolidating around 24,450–24,500, with recent trading below the 10-day Exponential Moving Average (EMA-10), signaling short-term weakness. The put-call ratio (PCR) at 1.05 suggests a slight bearish bias, as put buying is marginally higher.
- Support and Resistance Levels: Key support is at 24,330, and resistance is at 24,590. A break below support could accelerate downward momentum, while a move above resistance might trigger a short-covering rally.
- Implied Volatility and Option Greeks: Implied volatility is assumed to be moderate, with ATM options having premiums around ₹150. Delta for ATM puts and calls is approximately 0.5, indicating balanced sensitivity to price movements. Theta (time decay) is a concern for intraday trading, as the option’s value may erode if the market remains flat.
Fundamental Analysis
- Macroeconomic Cues: Global trade concerns, particularly U.S. tariffs on India, are weighing on market sentiment, contributing to a bearish outlook.
- FII/DII Flows: Foreign Institutional Investors (FIIs) hold only 9% long positions, indicating cautious participation, while Domestic Institutional Investors (DIIs) are not significantly offsetting this trend.
- Sectoral News: Sectors like textiles and jewelry are under pressure, dragging the broader index. Banking stocks, such as Axis Bank and HDFC Bank, have shown recent weakness, further contributing to bearish sentiment.
- Global Markets Impact: Negative global cues, including U.S. market reactions to tariff announcements, are likely to keep Indian markets subdued.
Real-Time News Sentiment
- Headlines and Corporate Announcements: Recent reports indicate a bearish tilt, with analysts predicting a marginal fall at the market open. The Nifty 50 closed at 24,574.20 on August 6, 2025, but the user’s provided level of 25,530 suggests a potential intraday recovery or discrepancy in data.
- RBI Commentary and Geopolitical Developments: No specific RBI announcements are noted for August 7, 2025, but ongoing global trade tensions, particularly U.S. tariffs, are creating uncertainty.
- Social Media Sentiment: Posts on platforms like X show mixed views, with some analysts expecting a 500–700-point fall, others predicting consolidation, and a few anticipating a breakout to new highs. The overall sentiment leans bearish but with potential for volatility.
Option Buying Strategy Recommendations
Given the high-risk approach and the trading window of 9:30 AM to 3:00 PM IST, the following strategies are evaluated for buying near ATM call and put options with the Aug monthly expiry (August 28, 2025).
Strategy 1: Buying Call Options Only (Near ATM)
- Strike Price: 24,500 (closest to the current level of 24,530)
- Assumed Premium: ₹150 (based on typical ATM option premiums for Nifty 50)
- Expected Return Calculation:
- Upside Scenario (30% probability): If Nifty closes at 24,700 (up 170 points), the call option is in the money by 200 points (24,700 - 24,500). Profit = 200 - 150 = ₹50.
- Downside Scenario (50% probability): If Nifty closes at 24,300 (down 230 points), the call option expires worthless. Loss = ₹150.
- Volatile Scenario (20% probability): Assuming a break-even outcome on average (no significant profit or loss).
- Expected Profit: (30% × ₹50) + (50% × -₹150) + (20% × ₹0) = ₹15 - ₹75 + ₹0 = -₹60 (a loss of 40% on the premium).
- Major Risks:
- High likelihood of loss if the market falls, given the 50% probability of a lower close.
- Sudden downward volatility could lead to the call option expiring worthless.
- Unexpected positive news (e.g., global market recovery) is required for profitability, which is less likely.
Strategy 2: Buying Put Options Only (Near ATM)
- Strike Price: 24,500 (closest to the current level of 24,530)
- Assumed Premium: ₹150 (based on typical ATM option premiums for Nifty 50)
- Expected Return Calculation:
- Downside Scenario (50% probability): If Nifty closes at 24,300 (down 230 points), the put option is in the money by 200 points (24,500 - 24,300). Profit = 200 - 150 = ₹50.
- Upside Scenario (30% probability): If Nifty closes at 25,700 (up 170 points), the put option expires worthless. Loss = ₹150.
- Volatile Scenario (20% probability): Assuming a break-even outcome on average (no significant profit or loss).
- Expected Profit: (50% × ₹50) + (30% × -₹150) + (20% × ₹0) = ₹25 - ₹45 + ₹0 = -₹20 (a loss of 13.33% on the premium).
- Major Risks:
- The market may not fall as expected, leading to the put option expiring worthless.
- Sudden upward volatility (e.g., due to a short-covering rally) could erode the put option’s value.
- Time decay (theta) may reduce profitability if the downward move is not significant by 3:00 PM.
Comparison of Strategies
Strategy | Expected Return (₹) | Expected Return (%) | Primary Risk |
|---|---|---|---|
Buy Call Options (25,500) | -₹60 | -40% | Market falls, option expires worthless |
Buy Put Options (25,500) | -₹20 | -13.33% | Market rises or stays flat, option loses value |
Given the higher probability of a downward move (50%) and a less negative expected return, buying put options is the preferred strategy for a high-risk intraday approach.
Actionable Summary
- Recommended Strategy: Buy put options near ATM at the 24,500 strike for the Aug monthly expiry (August 28, 2025).
- Premium: Approximately ₹150 (based on typical ATM premiums).
- Probability of Profit: The 50% probability of a lower close supports put options, though the expected return is slightly negative (-13.33%) due to the premium cost.
- Strike Selection: The 25,500 strike is chosen as it is near ATM, balancing delta sensitivity and premium cost for intraday trading.
- Trading Window: Execute trades between 9:30 AM and 3:00 PM IST, monitoring key levels (support at 25,330, resistance at 25,590).
- Major Risks:
- Market Reversal: Unexpected positive news (e.g., favorable global cues or RBI announcements) could push the index higher, causing losses.
- Volatility: A sudden upward spike could reduce the put option’s value, especially in a volatile market (20% probability).
- Time Decay: Limited intraday movement may lead to losses due to theta decay.
Monitoring and Exit Strategy
- Key Levels to Watch:
- Support (24,330): A break below could confirm bearish momentum, increasing put option profitability.
- Resistance (24,590): A move above could signal a potential rally, warranting caution or early exit.
- Exit Plan: Consider closing positions by 3:00 PM to avoid holding into potential volatility at market close. If the index approaches 24,300, lock in profits; if it moves above 25,590, consider cutting losses.
Caveats and Recommendations
This analysis is based on available data and assumptions about option premiums and market conditions. Real-time option chain data, implied volatility, and intraday developments could alter outcomes. For a high-risk approach, buying put options aligns with the bearish sentiment, but traders should:
- Monitor real-time market data and news updates.
- Use stop-loss orders to manage risk.
- Be prepared for volatility, given the 20% probability of significant market swings.
Disclaimer: This is not a recommendation to buy or sell; it is intended solely for educational purposes.