The 'call' option contracts with 11,300-strike price saw premium erosion of nearly 40 per cent. The strike price saw an additional open interest or OI of 527,100 contracts, indicating strong participation from traders.
The strike price of 11,400 saw premium erosion of 44 per cent. The strike price had seen additional OI for 529,875 contracts.
Market participants say upside for the Nifty is capped at 11,500-levels and it could correct to 11,080-levels.
"This was the reason that there was heavy writing of 'call' contracts on Monday," Radke added.
On Monday, the Nifty touched day's high of 11,433 points, gaining as much as 232 points or over two per cent. This led to sharp surge in premiums of 'call' options. Market participants say traders taking positions at high premiums, were able to extract over 70 per cent gains from writing 'call' options at these levels.
"Some of the traders that took positions at higher prices got the benefit of a larger erosion in premiums of 'call' options," a dealer at a broking house said.
The Nifty ended 2.6 per cent lower from day's high point as confirmation of Coronavirus cases in Delhi and Telangana accelerated the selling pressure.
Market analysts say that any recovery is likely to remain weak. "Recovery is likely to be shaky and fragile. Index is likely to face stiff resistance near the 11,550 zone. It is a typical sell on rise market and bottom-fishing should be avoided for any longs. Friday's sharp sell-off has impacted the overall market trend," said Amit Shah, analyst at Indiabulls Securities.
"The next support zone on the downside for markets is at 10,900-11,000," Shah added.
Market participants say that the current market conditions can be risky for traders. "We could see healthy bounce back at support zones, but market direction could change quickly and traders will have to be on their toes to avoid heavy losses," said an analyst.
On Monday, market volatility spiked up with India Vix ending 8.5 per cent higher.