MUMBAI: A fat finger error on a weekly expiry Nifty options contract resulted in a loss running into an estimated Rs 200-250 crore for a trader even as brokers raked it in on both buy and sell sides. A trader inadvertently punched in an intraday sell order for 25,000 contracts (12.5 lakhs shares) on the illiquid, deep-in-the-money 14,500 call option expiring on June 2. The price of that option contract (50 shares in a contract) was around Rs 2,100 per share but since the trader quoted a much lower price the share plunged from Rs 2,100 to as low as 15 paise in a matter of minutes.
Upon realising he had punched the wrong strike at a much lower quote when the option was deep in the money, he had to reverse his earlier sell orders by buying them back at a much higher price (squaring off). This resulted in the option contract per share rising from 15 paise back to Rs 2100 levels as quickly as it fell. As the option was deep in -the -money (ITM), ie at 14,500 when the Nifty was at 16600 odd (Rs 2,100 ITM) the trader had to square off his trades at a huge loss. He had to buy back the 25,000 contracts.
The fact of an error was evident from the intraday volumes reflected at 56,872 contracts while the open interest at closing was just 7,228 contracts. When a call option seller sells a call he bets that the underlying asset will fall and he will get to keep the premium paid by the buyers of the contract. If instead the underlier rises above the strike price sold (14,500 in this case) plus the premium received he could face unlimited losses.