The summary of below news is Indian markets has new hedge fund entrants who are causing sudden spikes on expiry days and minting money from retailers. Not sure if those HFTs are reason for sudden spikes but definitely in last few months markets are experiencing very bad spikes resulting much losses for even disciplined trades and making trading real difficult for everyone and it is true that many lost.
There is nothing in the yahoo article.
yt, watched for 10m - he is speaking from his behind. Fear and conspiracy makes a good yt video i guess. There is nothing linking the hedge fund and spikes. May and may not be the case, but anyway its good to assume that markets are always like this.
Indices are very less volatile these days i think atleast from futures perspective. Indexes are dead most of the time intraday.
Every dip keeps getting bought, so perceived risk is low and we have low volatility and low fear. Sooner or later ( god knows when) it will become volatile again and people who are not used it will feel the heat and then complain and cry. People who don’t make money always have someone else to blame.
There is no reason not to expect sudden moves from time to time. Adapt. If everyone starts selling options and selling volatility, then its good for markets to make sharp moves from time to time to keep them in check. There is no free lunch.
I have seen and followed markets over 10 years but never seen these kind of intraday sudden spikes which are happening from last few months. Two rupee option going to 100 rs in 2 mins and again coming back to 5 rs, everything happening in under 5 mins types.
Yahoo article is saying Jane street is complaining that two of it’s traders moved to Millennium fund and started using their strategy thus reducing their profits. Unknowing their lawyers slipped the country this strategy is being implemented is India. They are saying they use this on options which has daily expiries unlike anywhere in the world.
Not sure if you have noticed sudden spikes, end of the day there seems to be not much movement but there are lots of spikes on both sides and correcting, all happening during intraday on mostly expiry days of that particular index.
We will have to quantify it, and i am lazy to do that for no reason. But i doubt this, atleast in index futures. Its not too much out of ordinary.
And anyway, markets do things like this from time to time - stuff that hasn’t happened earlier. Crude went negative !
I don’t trade options, but on expiry days, someone just selling far otm options without a hedge is probably asking to get hit like this eventually. 2 to 100 is probably not a big deal on expiry day, i guess perhaps coming back to 5 is not?
And the assumption that they are causing spike is completely out of his dream. Anything is possible, but then we can assume anything. Just FUD.
Just a handful of them were sharp imo. Anyway, expiry days always have had sharp moves sometimes in past, i dunno what you expect.
Markets move to test liquidity, perhaps if huge number of people are doing the same thing and keeping stops in similar areas, they are gonna get hit ?
Maybe maybe not, but volatility spikes tend to cluster, so get used it, more may happen.
His suggestion that all option buyers/sellers are struggling is also likely not true. There are some big option traders here that seem to be doing alright. And few months of tough market is perfectly normal. People expect too much. I am used to have dd of more than 6 months in trend following systems.
And that small fish / medium fish / big fish is a load of baloney that really has no relevance for traders. Just good for story telling. Lots of players combine to form a market and a single player has limited chance of impact on liquid markets. Any large spike is likely going to hurt the seller is my guess. Even more, all market orders need limits these days ( 1% for futures) so 1 order can only move index by max 1 percent and that should bring arbitrage algos quickly to take advantage.
Anyway, whatever may be happening, we need to adapt.
Trading gives challenges form time to time whatever your system. Most people wont be able to handle it either due to uncertainty intolerance or by taking too much risk. In my case, the crazy buy the dips was causing issue for shorts for some systems so i had to adapt. Similarly, an option trader needs to adapt to whatever may be causing problems.
There’s no smoke without fire. Global hedge funds were/are definitely having an eye on the booming Indian derivatives market.
Would be interesting to know if we can find what % of volumes these guys bring in to our markets
I don’t see anything about the “Jane Street case” that indicates there was manipulation. But I have to agree Intraday volatility has been unusually high, and that combined with low IV has made it tough.
And I have always maintained, Bank Nifty is comparatively the easiest of all major Indices to manipulate. Its the most lopsided Index in the world.