Rs 1,000 turns into Rs 20 lakh in 1 day! Short contracts of Kotak Mahindra Bank appreciate by as much as 71,600% (2024)

Kotak Mahindra Bank's shares fell by nearly 11% on April 25, a day after RBI barred the lender from taking on new digital clients and issuing credit cards

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Put options of Kotak Mahindra Bank that saw eye-popping appreciation was a topic of conversation on social-media today.

One trader shared a post showing a buy order of 18 lots at 3.11 pm yesterday (April 24)and said this person may have invested hardly Rs 1,000 and would have earned up to a whopping Rs 20 lakh today.

Also read:Kotak Bank shares plunge 10% on RBI curbs; stock ratings, target prices cut

Short contracts that expired today appreciated between 104 percent and a whopping 71,600 percent. For example, KOTAKBANK APR 1700 PE rose from 20 paise closing yesterday to Rs 60 today (29,900 percent), KOTAKBANK APR 1660 went from 5 paise yesterday to Rs 17.05 closing today (34,000 percent) and KOTAKBANK APR 1680 PE rose from its 5 paise closing yesterday to Rs 35.85 closing today (71,600 percent).

This came after the central bank placed restrictions on the bank's operations and, a day after that, the bank stock price fell more than 10 percent.

The Reserve Bank of India (RBI) has halted the private-sector lender from onboarding clients through online channels and issuing credit cards.

A veteran trader told Moneycontrol that, while the price appreciation looks unusual, it is really not, considering the underlying's price movement and that the announcement came close to expiry.

"All option premiums become zero on expiry and therefore many of these options would have been trading at 5 paise and 10 paise yesterday. Therefore, given that the stock price fell so sharply today and that the base (option premium) from yesterday was so low, the appreciation would look high," he said.

All of the options that appreciated by 10,000 percent and above were priced between 5 paise and Rs 1.55 at yesterday's closing.

Also read:RBI action: Kotak Mahindra Bank says taken measures to adopt new tech, assures existing customers

Industry analysts believe that the RBI directive is likely to hamper the bank's retail business and sentiment around the stock price.

Brokerage Jefferies wrote in its reportthat the central bank has pointed to material gaps in Kotak Bank’s digitaland security platforms over the pasttwoyears.

It added, "The bank has been asked to stop (1) onboarding new customers on online/mobile channels, (2) issuing new credit cards. These will be reviewed upon audit & resolution. HDFC Bank faced similar action in 2020 and it took 9-15 months to clear issues. If resolution takes >6mths, it could affect revenues & costs."

The analysts trimmed earnings 1 percent to 2 percent, lowered their price target from Rs ,2050 to Rs1,970, and maintained a 'hold' rating.

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first published: Apr 25, 2024 05:51 pm

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