Call sellers on SBI hit as MS ups target, rate cut hopes rise

Call writers who sold 315-strike SBI calls expiring on April 25 scurried to cover their short positions Tuesday after Morgan Stanley raised the price target on the PSU lender to Rs 425 apiece from Rs 375 for the current fiscal year, and on expectations of a rate cut by RBI Thursday, among others.

The extent of the unwinding was triggered by their stop losses being hit, pushing up the stock higher, data on NSE showed. The open interest (OI), which was 48.6 lakh shares (3,000 shares make one lot) on Monday, plummeted to 3.27 lakh shares overnight Tuesday – implying covering of a massive 45.33 lakh shares. The short covering pushed up the option cost by 36 per cent to Rs 21.3. The SBI share closed higher 2.5 per cent at Rs 330.9.

All options expire on April 25.


Rohit Srivastava of Sharekhan by BNP Paribas feels that those selling covered calls would have exited in a big way. Chandan Taparia of Motilal Oswal Financial Services expects the stock to have a shy at Rs 340 based on the derivatives data. The April futures contract witnessed OI rising by 7 per cent.

The data show that stiff resistance for the stock kicks in at Rs 340, followed by Rs 365 in the current series. The first support is at Rs 320, the second at Rs 310 and the major one at Rs 300. The PCR climbed from 0.55 Monday to 0.84 Tuesday, reflecting fresh put writing and short covering at the 315-strike call.