Option sellers lose shirts as wild price swings rule on Thursday
₹16.80 a share (50 shares make one contract) at 2.50 pm to ₹135, a 700% gain, by closing at 3.30 pm. The 19800 put’s premium rise was at a staggering 6,263% with the price jumping from 55 paise to ₹35 at close.
On the other side, the 19700 call option which opened at ₹24 a share, jumped to its intraday high of ₹192, a whopping 700% rise causing massive losses to call seller. However, from there it plunged by 66% to ₹65.
“Weekly expiry meant option sellers would protect their positions but heavy intraday volatility meant that both call and put sellers were trap-ped, what we see happening only 20% of the time," Chandan Taparia, head of derivatives research at Motilal Oswal, said. Agreed quant analyst Kruti Shah of Equirus who said sellers trying to protect their levels were “singed" by volatility on either side on Thursday.
Exchanges like the National Stock Exchange (NSE) offer trading in weekly Nifty and Bank Nifty options which expire on Thursday and Wednesday, respectively. These options are highly popular among proprietary brokers and retail traders.
NSE data shows that prop traders held 50.8% market share in index options in Sept-ember, retail had about 34.8%, FPIs 6.9%, corporates 2.4%, DIIs 0.1% and others 4.9%. Options facilitate the purchase or sale of an underlying index or stock for a preset price on a future date.
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