Derivatives not for ordinary folks

The Jane Street Episode Shows How F&O Expires Can Be Influenced

- SAIKAT NEOGI

THE JANE STREET case is a strong wake-up call for ordinary investors about the hidden risks in Futures and Options (F&O), or derivative trading. It exposes how global institutions with cutting-edge algorithms can distort expiry outcomes in options and underlying stocks.

In a market where deep pockets, speed, and information edge matter, ordinary investors often find their directional bets are swimming against powerful, unseen tides. They should treat regulatory red flags and market asymmetries as warning signs, say experts.

The market regulator's interim order against Jane Street reveals bizarre patterns—on expiry day, volumes and participation in index options was far higher than in the underlying constituent stocks and futures. For instance, on one expiry day (January 17, 2024), ₹103 lakh crore of Bank Nifty options traded 353 times the volume of the actual bank stocks, underscoring that things were far from normal.

"If a big fish could exploit such anomalies, ordinary investors must realize this arena isn't a level playing field and approach it with extreme caution," says Varun Fatehpuria, founder & CEO, Daulat Finvest.