According to Feroze Azeez from Anand Rathi Wealth, the spike was driven largely by the mechanics of ADRs and derivative strategies. He explained that ADRs, unlike domestic shares, do not have futures, which makes it difficult for option sellers to hedge their positions. “If an ADR keeps approaching its option strike, the seller needs to buy the underlying to hedge. In ADRs, there is very little efficiency to hedge delta positions, so this can trigger a short squeeze,” he said. He added that while the intraday jump was dramatic, the stock ultimately closed just 5-6% higher, reflecting the underlying fundamentals more accurately.
The ongoing buyback may have contributed to the move. Azeez noted that fundamental factors can push a stock up by 3-5%, but the exaggerated spike was due to short gamma positions built by options traders. “The closing move of about 5.8% is more fundamental; the rest was derivative-driven,” he said.
On identifying short squeezes, Azeez said it is easier for professionals with a deep understanding of options and the Black-Scholes pricing model. “Algos can identify potential moves and squeezes, and the gains are computable based on underlying price changes. For retail investors, it is difficult without understanding delta positions,” he added. He also praised SEBI’s move to publish delta positions rather than just notional values, calling it a significant step toward better transparency.
Analysts suggest that investors focus on end-of-day prices rather than intraday spikes, while being mindful of both technical and derivative-driven factors that can influence ADR movements.
