Intriguing trade on Jet stock counter as airline suspends operations
In case the situation improves - a contrarian on Jet, though very risky , could yield “substantial gains.
The share fell 31 per cent to Rs 165.75 when markets opened Thursday after a holiday the preceding day when Jet announced the suspension of operations. The stock was in an F&O ban period since April 3, meaning fresh buy-sell derivatives bets could not be initiated. Traders instead moved to the cash segment where they began taking positions on Jet on an intraday basis — intraday squaring off. What you buy /sell during a trading session, you square off before its close and pay or receive the difference.
Ahead of that, on Tuesday, after the Jet board met to request for a lifeline from lenders led by SBI, the quantity of shares traded jumped to around five times the daily average of the past few days. However, compared with traded quantity (5.09 crore shares), shares that actually changed hands were 18.2 lakh or 3.6%, as per NSE data. On Wednesday, the airline halted operations as lenders declined to extend a lifeline. But that was a trading holiday.
On Thursday, as the market opened, the share gapped down 10% and by trading day end closed down 31%. The number of shares traded, like on Tuesday, was around five times that normally traded daily, with one interesting difference. Against traded quantity of 5.68 crore shares, delivery stood at 57.38 lakh shares, or 10% of traded quantity, a very high percentage for the Jet counter, NSE data revealed.
This buying prevented the share from plumbing more.
But, the intriguing question the data throws up is that why would someone buy the share of a company whose very survival’s at stake.
Derivatives analyst Nitin Kedia of Kedia Commodity , an NSE member , believes that some of these buyers expect the stakeholders (banks, mainly) to pull a rabbit out of a hat in due course and “get the airline’s wings back in the air.”
Another derivatives analyst said on condition of anonymity that being a contrarian on Jet, though very risky , could yield “substantial gains “ in case the situation improved .
Another significant feature was that despite the share falling 31% to Rs 165.75 sellers of the 220 and 200 puts expiring on April 25 did not square off positions in a big way despite their facing a huge loss. Basis Thursday closing the 220 put is Rs 55 in the money and the 200 put is Rs 34 ITM for the buyer. That means the seller is facing a huge loss but is still holding on in the hope that the dark clouds would clear, added Kedia. A put seller loses when the option price falls below the strike sold minus the premium earned.
The Jet counter is out of F&O ban from Monday. How trade pans out will be interesting to watch.