Long unwinding refers to a scenario in which the stock price falls alongside a decrease in futures open interest. In Friday’s trading session, five stocks saw a lengthy unwind. Here is the list:
List of Stocks saw a Lengthy Unwind:
| OI change on October | Change in stock price | |
| Axis Bank | -1.81% | -0.96% |
| ICICI Bank | -1.45% | -1.48% |
| REC | -1.22% | -1.14% |
| Mahanagar Gas | -1.09% | -1.31% |
| Atul | -0.62% | -1.47% |
What is Long Unwinding?
In the stock market, long unwinding refers to the process by which traders or investors with long positions in a specific stock or security begin to liquidate their holdings. Their previously held long holdings are reduced or unwound as a result of this selling pressure. When investors think the stock has peaked or when they predict a decline in the stock’s price, long unwinding usually takes place.
When, Why and How long unwinding or long cover impact?
Some major characteristics of long unwinding in stock futures are as follows:
- Traders may engage in prolonged unwinding to lock in profits, minimize losses, or reduce their exposure to market risk.
- When a large number of traders begin to unwind their long positions, the price of the futures contract may fall because supply outweighs demand.
- Long unwinding can indicate that traders are growing more cautious or negative about the underlying asset’s future increase.
Is Long Unwinding Bearish or Bullish?
To determine whether long unwinding is a bullish or bearish signal, analyze its impact on market direction. Long unwinding is akin to numerous traders opting to liquidate their holdings. Now, the main question is whether this is a positive (bullish) or negative (bearish) development. When a large number of investors sell their stocks at once, prices typically fall.
