SL Hunting in Options

Dear Team,

We know that the futures and options move based on the underlying asset. In case of NIFTY FUT, NIFTY 50 is underlying for which there are 50 stocks are underlying.

We trade using futures or options to represent our view. I heard from many videos and read in articles that there are at times stop loss hunting done by bug institutions. What I am not able to understand is that, if the index reaches one specific support or resistance, how can an institution do that to the options or futures that are being traded, unless they do the modification of its underlying, inn our case, to these 50 stocks. Please clarify.

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Institutions couldn’t care less about hunting stop losses. The moves are entirely dependent on the flow and it may sometimes give an impression that stop losses are getting hunted. You can even call it collateral damage for want of a better phrase.

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@joyesh, which means that there are nothing like that done intentionally and it cant be done at the derivatives level, is that correct?

It would be a stretch to say that

But there are no incentives to do that. Probably someone else can shed light on this.

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