Stocks

YES Bank 60-call option traders make a killing in a few minutes on expiry day!

KS Badri Narayanan Chennnai | Updated on October 31, 2019

Just moments before YES Bank’s announcement, options of 60-call and 65-call were quoting at just around 10 paise. After the announcement, these options zoomed to ₹18.4 and ₹13.5 respectively.

Traders in YES Bank options of 60-call and 65-call would have made a killing as the stock zoomed 30 per cent after the beleaguered lender said that it had received a binding offer for a $1.2 billion investment, on the expiry day.

YES Bank on Thursday (at around 13:09 PM IST on the BSE) said that it had received a binding offer from a global investor for an investment of $1.20 billion in the Bank, through the fresh issuance of equity shares.

Just moments before YES Bank’s exchange announcement, options of 60-call and 65-call were quoting at just around 10 paise. Those who bought these options would have spent a maximum of ₹300, as the market lot is 2,200 shares.

After the announcement, these options zoomed to ₹18.4 and ₹13.5 respectively. Profits for those who sold at the highest level would have been in excess of ₹40,000 and ₹27,000 respectively.

According to market sources, just before the announcement, the 60-call option of the current month attracted higher trading volumes. In theory, an investor who purchased 3 YES Bank 60-calls could be at least ₹ 1lakh richer.

However, the November month 60-call did not see such wild swings. The price of the 60-option, which opened at ₹ 6.80, lower than the previous day’s close of ₹7.05, hit a high of ₹21.80 and a low of ₹6.25. Currently, the options are trading at ₹16, whereas the underlying YES Bank shares rule at ₹70.05.

The bank, however, did not disclose details of the global investor.

Some market watchers believe that SEBI will probe the price action.

According to a Chennai-based analyst tracking the F&O segment, this is a big lesson for option writers (sellers) who think easy money can be made by selling deep-out-of-the-money options.

“As trades now have compulsory delivery, options sellers have to cover up at whatever cost,” he said, and cautioned that without knowing risks, trading in F&Os could wipe out an investor’s capital in no time.

Published on October 31, 2019

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