THE futures market yesterday saw the biggest rise in points terms since 1987, with evidence emerging of a short squeeze which could prove expensive to some investors if the market stays up until the end of the month. The February index contract rose 308 points to 6,155, a rise of 5.3 per cent that took it 106 points above the cash index. The March contract closed at 6,150, up 298 points, on 1,641 lots, and the June future was at 6,145, up 305 points, on 141 contracts. A total of 9,726 contracts changed hands yesterday. Short-covering by major institutional investors was a significant factor behind yesterday's rise, said futures dealers. Dealers taking short positions agree to sell contracts that they do not have, on the assumption that the market will fall before the sell date. The surge prompted many equity-based brokers to speculate that buying by mainland investors was behind the heavy trading. However, futures dealers said a short squeeze was a significant factor in buying, as frenzied efforts by some institutions to cover short positions during the day provided trading momentum in futures, after a strong opening in the cash market. Sun Hung Kai Securities research director Percy Au-young said: ''There have been reports of mainland money coming into the futures market.'' Standard Chartered Securities research director Edward Chan Hung-kee said: ''Market sentiment has been buoyed by reports of talks between Britain and China over the plans to extend democracy in Hongkong.'' He said key events in the rest of the week would be an expected statement on Thursday from Beijing clarifying its stance on the British democracy plans and the gazetting of the British proposals in legislative form. Mr Chan said a delay in the gazetting of this Bill would be seen by investors as indicating that a Sino-British agreement was close. But futures dealers at a major UK-based brokerage reported that short-covering by institutions was a significant factor providing momentum for the index futures rise. ''Many have been short in the current period of political uncertainty and they are now panicking on the surge in the cash index,'' said a dealer at a HSBC subsidiary.