These trades called ‘injections’ are wiping out crores of capital in minutes

Market participants say that this is more frequent in the less-liquid options of Sensex and Mid-cap Nifty, though there have been instances in Finnifty as well. (Photo by Karolina Grabowska: Pexels)

On February 2, the price of Sensex 71,000 PE went up approximately 7x from Rs 12 to Rs 84 in five minutes, then fell to Rs 16 and then shot up to Rs 70 in the next five minutes — all between 12:25 and 12:35 noon.

There have been other such crazy spikes. A veteran trader, Jitendra Jain, has been noticing such movements for the past six months and has even given them a name — 'injections'.

He started calling them injections because the price movements appear like injections on the candle charts and because they can be painful jabs that wipe out lakhs or even a few crores of rupees in minutes.

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Shreyas Bandi, a well-respected trader, said that people who trade in a few crores — anywhere between Rs 2 crore and Rs 10 crore — have lost 8 to 10 percent of their capital in just a few minutes because of this phenomenon.

Market participants say that this is more frequent in the less-liquid options of Sensex and Mid-cap Nifty, though there have been instances in Finnifty as well.

A trader shared on X (formerly Twitter) how he was making a profit of Rs 1 lakh when he was headed to the gym and came back to find that his put option had been squared off at 20x his sell price. He had sold a put option at Rs 50, but the market fell more than he had estimated, and the option was squared off (by buying the put option) at Rs 1,000. The trader shared that his entire year’s profit of over Rs 80 lakh was gone in one move.

Various people have replied to the tweet with their experiences. One said that he had sold Sensex 72,500 at Rs 44, and it was squared off at more than 10x the price at Rs 441.

Why is it happening?

The name Jain gave to these price movements has caught on. On X, people have started frequently posting about the “injections” they have received.

Jain believes that these surges started happening because of congestion, with too many players trading the same contracts at the same strikes. Therefore, when a stop loss hits, everyone tries to exit at the same time, and the price of the option shoots up to meet the demand.

For example, if you have sold Sensex 70,000 PE thinking the index won’t fall that far and it does, then you will need to buy the put option to square off your position. But, since many people are betting on the same price movement, all of them will compete to buy the same put option, and therefore, the price of this contract will shoot up.

Bandi compared the phenomenon to a crowded stadium that suddenly sees smoke rising from a corner. “The danger will not come from that possible fire but from the stampede when people are rushing out of a single exit,” he said, to illustrate why the crowding at a strike price can be more dangerous than an event that sets off a panic.

Also, people choose market orders over limit orders to ensure that they get an exit. Market orders cause a buy/sell of an option at whatever the market price is at that point, while limit orders are executed only if the price of the security falls within a range.

These events have become more probable with the multitudinous contracts that are being sold. Now there is an expiry every day — Monday is the day for Midcap Nifty expiry, Tuesday for Finnifty, Wednesday for Bank Nifty, Thursday for Nifty, and Friday for Sensex — and most people trade on the same instruments on their respective days of expiry.

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The initial days

Jain noticed the phenomenon first on September 7, 2023. It was on Nifty 19,750CE (call option) when the option went up from around Rs 5 to Rs 36 — more than 7x — in just five minutes.

Back then, it was happening maybe once a month. But in the last two months, the frequency has gone up to three to four times a month, he said.