Expecting the current pullback to continue for a few more days, futures and options (F&O) traders On Wednesday unwound their short positions at 3,300-3,400 call options. These traders expected the Nifty to achieve the 200-DMA (daily moving average) level of 3,443 sometime next week and, hence, they built up long positions of 637,600 shares in 3,500 strike call options.
The open interest (OI) at 3,300 strike call options declined by 540,850 shares, indicating that traders expected the Nifty to trade above 3,300 going forward. The 3,400 strike call options added an OI of 299,600 shares despite a trading volume of 7.55 million shares, indicating unwinding of shorts and build-up of fresh long positions at 3,400 call options.
The Nifty April futures witnessed short-covering of 4 million shares during the intraday trade and build-up of fresh long positions of 2.75 million shares to end the day. Nifty futures have been trading at a premium for almost three weeks now and hold an OI of 40.92 million shares, the highest since March 2008. Foreign institutional investors (FIIs) have covered short positions and built up long positions ever since the April series started trading at a premium to the spot.
The Nifty in On Wednesday session took the vital support at 3,150 and rallied 200 points to close above 3,300.
