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.
3. 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.
4. Again, next trade executed at 14:36:08 with 500 quantity purchased at 805 Rs.
5. 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
6. 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 920*50*2000= 9.2 Crores.
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.