Yesterday(2-5-2014) even though Nifty ended flat, OTM calls and puts were up 25%. Does this mean people are building a position expecting a big move on either side or is there something else to it?

[Karthik]

This is a classic example to illustrate the fact that Options are not linear instruments.

Unlike futures, where only the direction matters Options have a variety of factor influencing them…volatility being one of them.

While the markets stayed flat, volatility increased by nearly 8%. Whenever volatility increases option premium also increase.