The probability of a deeper correction to 10500 was evident from the heavy short covering at 11000, which before Friday had the second highest OI after 10500.Traders bought back 13.74 lakh shares at this strike on Friday, pushing up its price by 147 per cent.What is giving currency to the probability of a deeper correction below 10700 is a fall in the put-call ratio (PCR) from 1plus for a long time to 0.82 on Friday.This means traders and investors are selling more Nifty call options than Nifty puts. This underpins belief of the market facing resistance to upward movement.Traders heavily sold call options from 10800 strikes to 11200 strikes on Friday. For instance, the 11200 call, which saw OI rise 11.1 lakhs shares, witnessed premium (price paid by a buyer) fall a whopping 78 per cent to Rs 13.5 a share.Traders sell more calls when they believe that markets won't rise. They sell fewer puts and charge higher premiums from buyers at such times. This could exacerbate the selling.

Source: Economic Times February 03, 2018 08:47 UTC