Nifty 14500 CE trade which made day low price of 0.15 and day high price of 2139, due to erroneous order by a broker who lost 250 crores. Some ppl claim few others brokers made 50 to 75 crores profits. But what really happened? Here’s the tick data analysis that shows true picture.
Yesterday being a weekly expiry, market was so calm, not making any major movements. Nifty was trading around 16500 but there was a freak trade happened with deep In the money option 14500 CE. It was trading around 2000 levels, usually the liquidity will be very shallow with ITM options, it was hovering around 2000 to 2100 levels but suddenly around 2:30 pm, the price of the option went as low as 0.15 paise.
Here’s the tick data price chart of 14500 CE option strike
Here’s the snapshot of market depth window of 14500 ce
What’s fascinating about this sudden move is, usually when a freak trade happens it last for few seconds and instantly get back to its average traded price levels. But in this case, there were many buy trades executed at a very low price. Obviously this a fat finger error trade, where a broker based out of Kolkata, erroneously placed sell order for 14500 CE instead of 16500 CE.
Tick Data Analysis:
Here’s the time line analysis
This freak movement happened around 2:30 pm, when we checked the tick data of 14500 CE, we could see that last traded time was 12:57 for a long time. After 12:57 pm, there was no trade executed with the counter, 14500 CE.
Then around 14:34:08 a new trade happened. Next three seconds, LTP went from 2063 to 1407.
After that, next buy order came around 14:35:01 with 2000 quantity purchased at Rs. 1320. That’s almost for 1 minute, no other trades executed. Just one trade executed.
Again, next trade executed at 14:36:08 with 500 quantity purchased at 805 Rs.
The real jackpot buy trade came in after 14:36:51 with huge quantity purchased at less than Rs.2, thousands of quantities were purchased at extremely low price around 14:37
By 14:38 price of 14500 ce came back to its average traded price of 2000 levels. Then the liquidity in the counter increased, probably people who were luck to buy at the extremely low price were liquidating their position.
Many people wrongly assumed that 1000’s of lots were purchased at the extremely low price of 0.15 paise. No, only few quantities were filled in at this lower price. Around 920 lots were purchased at an average price of 0.95 paise and Around 142 lots were purchased at 18Rs. If we calculate is 920 lots * 50 qty * 1 Rs. = Rs. 46,000 total investment. Assuming they’re liquidating around 2000 Rs., then its 920502000= 9.2 Crores. With an investment of around Rs.50k, someone made 10 crores. That’s all, its not 100 of crores as we see in news.
So the windfalls of profits or loss that we see on news media is highly exaggerated. Just because we see an extremely low price or high price in a chart doesn’t necessarily mean most of the trades are executed at that extreme prices.
Is it possible for normal traders to play with deep ITM options where liquidity is very less plus they even purchased at around 95-98% lesser to the market price. Is it possible to execute for a normal trader with 99% discount when option is deep ITM. Who was the daani to offer at 100% discount🥱
The issue here was that the contract didn’t drop immediately, the price kept reducing and hence even the circuits kept automatically getting updated to the new price. We used to have something called an execution range before where unless manually updated by the exchanes, orders couldn’t be placed beyond that. Execution range was above and beyond the circuit limits. The issue here was that unless the execution range was manually updated by the exchange, orders wouldn’t go through. So when markets were volatile, this was creating an issue. Maybe the way to solve this is to find a better way to implement the execution range at the exchanges.
If both the buyer and seller agree the money could potentially be paid back by the one who profited. But this isn’t just one customer on the profiting side, there are bound to be hundreds and tough to get everyone agree.
In theory, yes. But demand and supply also play a key role. Take for instance scrip ABC is trading at 100, there’s a buyer at 90 and seller at 110. If someone wants to sell this scrip at any cost, he/she will likely place a market order and it will get filled at 90 because that’s the best price at which buyer is available.
As @t7support has already explained: Its free market. Price can go up and down based on which direction money is. Theory is sometimes not very comprehensive.