New Delhi: Traders have been talking about making big profits by betting against Kotak Mahindra Bank’s stock through something called “put options.” Even though the bank faced some difficulties recently, some traders managed to make money by using these put options.
Here’s how it works:
When you buy a put option, you’re essentially betting that the stock price will go down. If it does, the value of your put option goes up, and you make a profit.
One trader, known as OptionsAlgos-Quanta, seemed to have made a clever move by buying put options for Kotak Mahindra Bank when its stock price was low. Then, when the bank’s share price dropped even further due to some issues with regulators, the value of those put options shot up, leading to big gains for the trader.
For example, one type of put option for Kotak Mahindra Bank went up in value by a whopping 71,600% before it expired. That means if someone had bought that option when it was really cheap, they could have sold it for a huge profit when the bank’s stock price dropped.
This sudden increase in the value of these put options happened because of the big drop in the bank’s share price. And since these options usually expire on the last Thursday of each month, the timing lined up perfectly with the bank’s troubles, making the trader’s move even more profitable.
It’s worth noting that these options usually become worthless when they expire, which is why they were trading at low prices before the bank’s troubles caused their value to shoot up. This shows how traders can make big profits by being smart and reacting quickly to changes in the market and regulations.
