All Things Policy When Options Trading Becomes Market Manipulation
Aug 6, 2025
Rijesh Panicker, an Adjunct Fellow at the Takshashila Institution, shares his insights on the fascinating yet precarious world of options trading. He discusses a recent case involving Jane Street, highlighting the thin line between legitimate trading and market manipulation. The conversation dives into how retail investors navigate these complex markets and the psychological risks they face. Rijesh also emphasizes the regulatory challenges in maintaining market integrity and educates listeners on the importance of transparency and informed trading practices.
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Basics of Options and Futures
- Options give the right but not obligation to buy or sell an asset at a set price by a certain date.
- Futures bind parties to buy or sell at a predetermined price on a future date, obligating settlement.
India's Unique Options Market
- India's options market is one of the largest globally and highly unique due to vast retail investor participation.
- Retail investors account for around 40% of this large and liquid market, a rarity worldwide.
SEBI's Manipulation Accusations
- SEBI alleges Jane Street manipulated prices by buying specific bank stocks to influence the bank nifty index then profiting on options.
- Tactics included pumping prices to increase call option premiums and dumping stocks near expiry to boost put option value.