As per a Bloomberg news report, Indian retail investors lost Rs 5.4 billion dollar in F&O in FY 22. Since stock market is a zero-sum game, somebody must have gained Rs 5.4 billion dollar from the loss of retail investors. Who are these masked beneficiaries?
A courtroom drama gives a glimpse of the truth. The trading giant Jane Street has revealed that they earned almost 1 billion dollar from option trading predominantly from Indian option market. We may expect a similar profit from Jane’s rivals like Millennium Management, Optiver, Citadel Securities LLC, IMC Trading BV, Jump Trading etc. These option trading giants have the acumen to beat the street with their cutting edge technology and high-speed trading algorithms.
These option sharks of D-Street have money muscles to move index/stock in their desired direction. They are well equipped with high frequency trading platforms, algos and colloquial servers. It’s difficult to compete with them with age old technical indicators, chart patterns and petty cash type investible surplus. The option market of D-Street is proving to be a robbery street for retail investors.
One must have seen the Bank nifty option prices surging from Rs 1 to Rs 500 on expiry day. A delivery-based buy or sale of HDFC Bank, ICICI Bank and SBI shares of around Rs 500 crore is enough to fuel such move in either direction. Their strategy is simple: first take position in F&O and then propel a move through delivery-based buy/sell to carve out exponential gain from such position. Is this market manipulation? SEBI must think of.
