Markets likely to stay cautious in final trading week of 2025

on the Nifty and the Bank Nifty by 120,022 contracts on Friday from 53,442 contracts on Wednesday, as per data from the National Stock Exchange (NSE). Markets were shut on Thursday for Christmas.FPIs increased their cumulative net short calls by 13,953 contracts from 2,422 contracts during this period, while retail and high-net-worth investors and domestic institutional investors were net buyers.Calls are generally sold when traders expect the markets to remain flat or correct.

This enables them to pocket the premiums paid by the call buyers. Simultaneously, the purchase of more index puts adds to the bearish sentiment.Nifty options expire on Tuesday every week, while Nifty futures and Bank Nifty futures and options expire on the last Tuesday of a month.Traders either roll over their futures positions or let them settle at expiry, depending on their sentiment.Expiry data is closely watched by participants to gauge market sentiment.

Large institutional desks are generally considered more market-savvy than retail /HNIs. Mutual funds generally don't write or sell index derivatives, as that exposes them to huge risks.“The last expiry surely looks like markets will remain sideways within a 25800-26200 range with a bearish bias amid thin volumes,” said Kruti Shah, quant analyst at Equirus Securities.

“Trading volumes generally thin during the year-end with most investors away on holiday.”In addition to selling calls, prop traders increased their cumulative index put longs by 72,073 contracts on Friday from the previous session. FPIs raised their index put longs or purchases by 52,077 contracts over the period.Put options are purchased on the anticipation of a correction.