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A rise in the underlying asset's price accompanied by a rise in open interest indicates?

1. Short build-up
2. Long build-up
3. Short covering
4. Long unwinding

Correct answer: Long build-up

Solution

In derivatives trading: Long build-up = price ↑ + Open Interest ↑ (new long positions added). Short build-up = price ↓ + OI ↑. Short covering = price ↑ + OI ↓. Long unwinding = price ↓ + OI ↓.

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