Nifty surges in last hour, Call option writers caught off guard

Stock market trend

From a low of 24,941 at 11 am, Nifty witnessed a sharp rebound in the last hour of trade, reaching new all-time highs on 12 September. The sudden surge, driven by short-covering on Nifty's expiry day, pushed the index to a record high of 25,408.45.

This jump caught call option writers off guard while delivering massive gains to call buyers, with some "hero or zero" trades yielding over 3,000 percent returns.

The Nifty 25,200 call option, which was trading at Rs 7 in the morning, skyrocketed to Rs 168 in the final hour. Bank Nifty also surged, jumping 800 points to trade at around 51,800.

“Nifty rocketed on the weekly expiry day, surprising call option writers. The unwinding of call writing bets fueled the rally,” noted Akshay Bhagwat, VP of Technical Research at JM Financial.

Preeti Chabbra, a derivatives trader, added, "The market gained momentum in the last half-hour, supported by movements in international markets and expectations of a potential Fed rate cut. With heavy call writers positioned at Nifty's all-time high of 25,300, the final-hour gamma move accelerated the rally."

Is Nifty headed towards 26,000?

Looking ahead, Bhagwat said, "For the September 19 expiry, Nifty call writers are placing fresh bets at 26,000, while 25,500 and 25,800 calls are seeing potential buying interest. Put writers have strengthened their positions at 25,000, which now appears to be a solid support level going into September."

Derivatives trader Santosh Pasi shared a bullish outlook on Nifty: "We are optimistic about Nifty, and believe it could reach 26,000, most likely by the end of September," said Pasi.

At close on Thursday, BSE Sensex was up 1,439.55 points or 1.77 percent at 82,962.71, and the Nifty 50 was up 470.40 points or 1.89 percent at 25,388.90. As many as 2228 shares advanced, 1564 shares declined, and 103 shares were unchanged.

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