Through the last two weeks, Jane Street has been in the news for all the wrong reasons! Just days ago, there were reports that one of the co-founders of Jane Street had been ‘duped’ into funding AK-47s for a coup in Sudan. However, that embarrassment now pales in comparison to SEBI’s own ‘coup’ against the secretive global trading firm. The market regulator’s recent July 3, 2025, interim order alleges that Jane Street manipulated expiry-day prices to profit from index options.
The key takeaway from the report: what looks like a genuine index move might just be a well-timed trap. Let’s break down what this means for you as a retail trader. It’s a different matter that this was apparent to regular option traders over the last many years who are used to witnessing wild and inexplicable moves in the index around 9.30-10 am or 2.30-2.45 pm on expiry days.
When you profit, it may not be your skill
Index options, especially Bank Nifty, tempt millions of Indian individual traders with dreams of jackpot gains. But 93 per cent lose money. Between FY22 and FY24, SEBI says individuals lost over ₹1.8 lakh crore in equity F&O.
Even among those who made occasional profits, it would have been comforting to believe that your call/put option made money because your analysis was right. You tracked the charts, the momentum, the signals. But what if someone else planted those signals?
SEBI’s order shows that Jane Street allegedly bought Bank Nifty stocks aggressively in the morning to lift the index, and then sold the same stocks to bring it crashing down, all while betting the opposite way in options. The setup looked real. The move felt organic. But the intent, SEBI says, was to mislead.
If a trade works in your favour, that doesn’t always mean you read the market correctly. It may simply mean you were lucky to ride someone else’s wave, before it turns against you.
Expiry-day moves: Real or rigged?
The SEBI report outlines multiple expiry days between January 2023 and March 2025 where Jane Street allegedly repeated the same expiry-day strategy: build the index up early, take an opposite options position, and then pull the rug by selling stocks.
This is not illegal by itself. Buying and selling stocks, futures and options together is perfectly legal. But SEBI says the intensity, timing and lack of economic rationale points to a manipulative design aimed at profiting from the options side.
For retail traders chasing short-term expiry trades including scalping (chasing minor price changes in options price), this creates a dangerous setup. The index may appear strong, but it might just be a bait.
Trading ₹10,000 vs. moving ₹4,000 crore
On January 17, 2024, Jane Street’s most profitable day in the analysis, SEBI says the firm bought ₹4,370 crore worth of Bank Nifty stocks before dumping them just hours later. That day, over 16.15 lakh traders were active in Bank Nifty options. Only 4,675 entities traded in the actual index stocks. That’s the scale of the gap.
You’re placing bets on the index. But others are influencing what the index does. It’s not an equal contest. You may be a blindfolded passenger in a car someone else is steering.
Avoid weekly ‘jackpots’
NSE is shifting the weekly expiry of futures and options (F&O) contracts to Tuesdays from the current Thursday slot, effective September 27, 2025. Retail traders love weekly expiries. Premiums decay fast, prices swing wildly, and intraday profits can look juicy.
But that’s exactly why it’s dangerous. In its order, SEBI flagged abnormally high volatility on weekly index options expiry days.
Short-tenure weekly options are far more vulnerable to short-term shocks, fake rallies and expiry-specific positioning. If someone moves the index by 50-100 points with a few high-volume trades, it can destroy your option’s value instantly.
While options trading is best left to those with specific skills and talents in the space, if you are serious about understanding how the price evolves and still determined to trade, consider trading monthly or longer-dated options. . These instruments aren’t immune to volatility, but they’re far less prone to expiry-day distortions. But here too, don’t delude yourself into thinking that after multiple bouts of losing money, you actually have learnt lessons that can turn around your performance.
Invisibility cloak
Retail trades are visible, vulnerable and reactive. Big players, by contrast, work silently. They don’t announce intent. Their trades often get sliced across multiple accounts, masked in algorithms and disguised as momentum.
What looks like “market buying” might just be one player doing both sides of the dance, creating a story in cash and finishing it in options. You don’t see it coming. You just react. And by the time you react, the move is already priced in, or about to reverse.
‘Extended marking the close’ is another manipulative trading tactic, as alleged by SEBI, where large buy or sell orders are placed near the market’s close to sway the final price of a stock or index. SEBI’s interim order claims that Jane Street used this strategy on expiry days, such as July 10, 2024, to influence Bank Nifty’s close and profit from options positions.
This type of asymmetry is your biggest risk as a small trader.
Learn from their mistakes
You might think, if Jane Street made money with this strategy, why can’t I try the same? Sample this: The US-based firm earned a total profit of over ₹36,500 crore between January 2023 and March 2025. It made over ₹43,000 crore in index options, lost about ₹7,200 crore in stock futures, lost ₹190 crore in index futures and another ₹288 crore in the cash market during the period. The capital needed to do this is massive.
You, possibly trading on a smartphone mobile app sitting in Chennai, Delhi or Kolkata, don’t have that kind of firepower. You can’t move prices or absorb sudden reversals. You’re trying to copy a magician without the illusion kit.
In a bl.portfolio article (link: https://tinyurl.com/FnOBL) in the September 29, 2024 edition, we had explained why many option traders suffer from what is termed as the gambler’s fallacy.
Key takeaways
More importantly, Jane Street didn’t escape unscathed. SEBI froze ₹4,843 crore of their alleged gains, banned their entities from markets, and issued a stern warning. That’s not the kind of attention you want. Of course, Jane Street is going to fight this tooth and nail, and it remains to be seen how this saga eventually plays out.
Instead of chasing expiry trades and price noise, here are some practical things retail options traders can do.
* Avoid weekly options unless you fully understand the risks. Start with monthly ones to build discipline.
* Keep position sizes small. Never risk more than you can afford to lose when it comes to such adventurous ventures with your hard earned money.
* Watch volume in the cash market. If the index is rising but volumes in its top stocks are thin, be cautious.
* Don’t trade based on index moves alone. Always check if the underlying stock movement supports the index trend.
* Focus on learning and risk management, not jackpots.
* Always stay on vigil and be cognizant of the fact that your mind can deceive you when it comes to trading. Hard limits on stop-loss are a must.
The dream is real. But so is the danger. Retail traders come with ambition, not ammunition. They bring instinct, not insider knowledge. The Jane Street case doesn’t yet prove every expiry day is rigged, but it shows that expiry-day moves may be manipulated by those with enough resources.
You deserve to trade in a market that plays fair. But until that’s guaranteed, trade like you’re at a table where the cards may already be marked.
Build your skill, protect your capital and remember, sometimes, the most profitable trade is the one you don’t take.
If you have any thoughts on how this alleged manipulation may have impacted you in your trading journey, please write to us at bl.portfolio@thehindu.co.in
Published on July 5, 2025