A recent maneuver in the stock market has overshadowed the iconic “21 din me paisa double” dialogue from ‘Phir Hera Pheri’, becoming the talk of the town across trading circles. Just two days ago, a savvy trader capitalized on a significant opportunity, potentially raking in substantial gains.
The trader seized the moment by purchasing 18 lots of Kotak Mahindra Bank at an exceptionally low price. This strategic move came hot on the heels of the Reserve Bank of India (RBI) imposing restrictions on the bank, prohibiting it from onboarding new customers online and issuing fresh credit cards. Consequently, Kotak Mahindra Bank shares plummeted by at least 12% the following day.
The trader’s windfall came courtesy of put options, a type of short contract that profits when a stock’s price declines. These contracts typically expire on the last Thursday of each month, making this particular move all the more remarkable as it unfolded on the very brink of expiry.
Also read: Markets End Five-Day Rally As Sensex Drops More Than 600 Points
OptionsAlgos-Quanta, a prominent trading handle, revealed a startling revelation on Friday, showcasing a trading chart that indicated an insider’s purchase of several lots of KOTAKBANK April 1700 PE contracts at a mere ₹1,000 each. This seemingly minor investment translated into staggering gains of approximately ₹20 lakh.
The value of these short contracts skyrocketed between 104% to an astounding 71,600% before reaching their expiration date. According to reports from Moneycontrol, KOTAKBANK APR 1700 PE contracts surged from a closing price of 20 paise on Wednesday to ₹60 on Thursday, marking an unprecedented rise of 71,600%.
As option premiums tend to diminish to zero upon expiry, many of these contracts were trading at negligible values initially. However, the sudden crash in Kotak Mahindra Bank shares triggered a dramatic spike in options premiums, catapulting them to unprecedented highs. Experts cited by Moneycontrol elucidated that this sharp escalation was a direct consequence of the abrupt decline in share prices.
This extraordinary sequence of events underscores the dynamic nature of the stock market, where astute traders can seize fleeting opportunities to reap substantial rewards.
