

FPIs bank on options to raise gains from market fall
Subscribe to enjoy similar stories. Foreign portfolio investors (FPIs), who have been selling Indian shares since October 2024, have also doubled down on their bearish derivatives bets to make a quick gain from these positions, which generate profits when markets fall. In addition to shorting Nifty and Bank Nifty futures, FPIs have begun selling Nifty and Bank Nifty call options in the past six months to gain from a fall in the indices, exchange data shows.
A sale of a call involves the seller earning a premium from a buyer. If the market falls or stays flat, the seller gains; if it rises, the seller loses unless she owns the underlying stocks of Nifty or Bank Nifty. Futures facilitate a purchase or sale of an underlying stock at a fixed price on a future date.
A call option gives a buyer the right to buy an underlying stock or index at a fixed price on a future date. The seller of the call is obliged to sell the stock or index to the buyer. While FPIs have cumulatively sold cash shares worth ₹4.26 trillion since October 2024, they've extensively shorted Nifty and Bank Nifty futures contracts, reaching a record high cumulative net sell figure of 201,567 contracts on Tuesday, per NSDL and NSE data.
Additionally, entities classified as FPIs have, in a departure from normal practice, increasingly resorted to selling call options on benchmark Nifty and Bank Nifty to gain from the downside since Nifty first soared to a record high on 27 September 2024, shows exchange data. For instance, alongside index futures shorting in the past 15 months, FPIs net sold index call options on 95 trading sessions over the past 313 sessions since the Nifty first hit a record of 26,277.35 on 27 September 2024. The sales picked up since July
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