The huge options trade raises eyebrows

MUMBAI: Thursday, about an hour before Yes bank announced that it had received a binding offer from an investor, large amounts of purchase options with the exercise price at 60 rupees they were bought at an average price of 10 paise.

Soon after the announcement, as the stock price rose by as much as 30%, the price of this contract jumped to as high as Rs 18.40, a post by Kannan Singaravelu, a quant researcher and derivatives structurer, pointed out. So in effect, a Rs 1-lakh investment in Yes bank ’s Rs 60 call option s before the announcement on Thursday afternoon would have turned Rs 1.84 crore in about two hours. And if the trades were done at the day’s low of 5 paise, that Rs 1 lakh would be Rs 3.68 crore.

Market players said it was very unusual to buy large quantities of options contracts which are so ‘out of the money’ — meaning contracts with exercise price s so much above the prevailing market price.

Starting at 12.08 pm on Thursday (leaving aside trades in smaller lots), about 55 lakh shares of Yes bank were bought on the NSE in lot sizes varying between 1.1 lakh and 9.5 lakh shares, Singaravelu pointed out. While such large chunks of Rs 60 call option contracts were bought, the stock price was around the range of Rs 56-57.

comments