The weekly Sensex 67,000 call option, which expired on Friday, saw an unusual 50-fold surge in premium momentarily during the day.
The option contract saw its premium move from Rs 4.3 per share to as high as Rs 209.25 per share in just a minute at 11:02 a.m. This was before the option premium settled at Rs 5.45 per share the very next minute. Nearly 5.49 lakh shares were exchanged in that minute. The 67,000 strike options expired worthless by the end of the day.
Trading in the S&P BSE's Sensex and Bankex options has swelled, especially now that weekly expiries for these index options fall on Friday and Monday, respectively. This has been designed by the exchange so as not to clash with the NSE’s major index option weekly expiries like those of the Financial Services Nifty, Bank Nifty, and Nifty, which fall on Tuesday, Wednesday, and Thursday, respectively. And yet the BSE's options market is illiquid compared to that of the NSE’s.
This illiquidity often leads to sharp changes in prices, especially when a 'market order' is placed in these markets. A 'market order' is one where the buyer or seller accepts any and all standing price points until the full quantity of the placed order has been executed. This means that the entire order is likely to be filled at prices that may vary substantially if there are not enough traders to counter on the other side.
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