All About Jane Street Style of Trading

Recently, SEBI banned an investment and trading firm, Jane Street, from trading in Indian stock markets.

What did they do?

They made billions of dollars by artificially inflating the Banknifty option process.

This is what they did:

Step 1) Buy stocks listed in Bank Nifty in huge quantities. This created an artificial demand in banking stocks. Technical traders who look for short-term opportunities get a green signal to buy banking stocks. They also jump in. This created “the butterfly effect”.  Butterfly effect is when a small thing/action leads to a big thing/event.

Traders at Jane Street knew how many stocks to buy to create a butterfly effect. Exactly that happened. First, they bought the technical traders, and then the retail traders followed suit.

When an Index rises fast, its call options increase in value due to high demand, but its put options decrease in value due to low demand.

All this happened in 2-3 hours.

When traders at Jane Street saw the time had come, they did this:

Step 2) Sell inflated premiums Call Options of Banknifty and simultaneously buy Put Options in large, very large quantities.

Before I write further, just keep in mind that all this was done via algo-trading, to avoid silly mistakes. In any case, this was not possible to do manually, and the psychological impact could have led to mistakes. So to avoid any mistakes, they made use of computers (algo-trading).

Step 3) Start selling the stocks they bought to push the Banknifty prices down. This led to a fall in the Call option premium and a rise in the Put option premium.

Step 4) When they had sold all stocks, Banknifty went down almost 3% intraday – now they booked profit in both the sold call options and bought put options.

Like this, they made profits of Rs 36,502.12 crore across various market segments in India from January 2023 to March 2025.

Their highest profit day was January 17, 2024, when they made Rs 735 crore single day.

They used to take a loss in the cash segment and profit in the options segment, but their profit in the options segment more than compensated for the loss in the cash segment.

SEBI has confiscated Rs. 4840/- crores, approximately, from Jane Street, claiming these are ‘unlawful gains’ which Jane Street is denying and will challenge in the courts.

What has happened to options markets in India?

The volume of the options market in India is now down by an average of 20% since the ban.

Will it affect you, the retail trader?

If you always speculated and traded, then does it matter if a manipulator comes and takes away your money?

Speculation / naked trading will never make money either in the cash or options market.  If you are not trading with your brains, then you are set to lose even if there is no Jane Street in the markets.

You can do my options course and learn the best ways to hedge, trade and win the options game.

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