INSUBCONTINENT EXCLUSIVE:
seen in the so-called straddle on the NSE Nifty 50 Index
It was visible as recently as mid-May.A straddle is a bet on volatility that involves buying both a bullish and bearish option on the same
asset, with the same exercise level
on several expiry days, we could see the straddle price go higher by multiples of the starting price, and sometimes not exhibit any theta
firm Algoquant, referring to the erosion of value for options as their expiration nears
barred Jane Street Group LLC from securities trading in an order citing index manipulation
The US firm has denied the allegations, saying it was deploying an arbitrage strategy.
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The example it highlighted focused on weekly contracts tracking the NSE Nifty Bank Index, which were discontinued late last year as part of
SEBI curbs to halt a derivatives frenzy that triggered billions of dollars in losses for retail traders.The straddle became a tool to track
whether options prices on expiration days were becoming detached from the underlying asset for large stretches of time, according to about
half a dozen high-speed traders that Bloomberg News spoke to before the SEBI order was released
When the unusual pattern emerged, it likely reflected the presence of a whale making big bets in the market, they said
The traders also noticed the abnormal trading in less liquid options on the BSE Sensex Index, among other gauges.Earlier this month, a SEBI
official told Bloomberg News the regulator will expand its market-manipulation probe to include trades around other major equity gauges,
including the Nifty 50 and Sensex.There may be patterns similar to those described in the July 4 order in other indexes or trading behaviors
reflecting alternate strategies that have not yet been analyzed, SEBI board member Ananth Narayan wrote in the document, adding that the
regulator observed some suspicious activity on the May 15 expiration day.Market activity has slowed in Indian derivatives since Jane Street
On Thursday, the first major expiration day that followed the ban, the India NSE Volatility Index tracking bets for Nifty 50 swings ended at
its lowest level in more than a year, and volume of options on the gauge was lower than on recent expiration days
That day, the strange pattern on the Nifty 50 straddle was nowhere to be seen.
