How Jane Street Allegedly Extracted $5 Billion from Expiry-Day Mispricing
A rare look at how index options were quietly weaponized—and why SEBI says this wasn’t just smart trading.
Let’s talk about a billion-dollar game of poker — And the quiet tactics behind it — if proven — show just how far strategy can push the system.
Imagine this:
You walk into a casino where everyone’s playing blackjack.
But you’re the only one who knows the dealer’s next move. Not because you’re psychic. Because you made the cards.
That’s kinda what Jane Street allegedly pulled off in India’s stock market.
It is not explicitly illegal at the time, but regulators saw red flags. SEBI, India’s top market cop, isn’t buying the “smart trader” defense anymore.
Here’s how Jane Street (through its Indian and offshore arms) allegedly played the system — and made over ₹43,000 crore (US$5 billion) from index options trades between Jan 2023 and Mar 2025.
Let’s break it down like we’re explaining it to a fifth grader.
The Setup: What’s the game?
You’ve got two things:
The Index — like BANKNIFTY or NIFTY, which tracks a bunch of top stocks
Options on the Index — bets on whether that index goes up or down
Now here’s the key:
Options expire every week, and whatever the index closes at — that’s how those bets are settled.
Move the index just a little? You can make millions.
So, what if you could nudge the index up in the morning… then dump it in the afternoon… while holding a mountain of bets that profit when the index falls?
SEBI alleges Jane Street did just that.
Let’s walk through the playbook.
Tactic #1: The Pump and Dump… But for the Whole Index
Let’s use Jan 17, 2024 as an example.
Phase 1 — Morning Madness
Jane Street wakes up and goes shopping.
They buy a ton of banking stocks. We’re talking:
Over ₹4,300 Cr worth of stocks and futures
Making up 15–25% of the market in some stocks
Buying above the current price to push everything up
Result? The BANKNIFTY index looks healthy. Retail traders see it rising and think, "Aha! It’s going up!"
Meanwhile, behind the scenes, SEBI said Jane Street was building a massive bet the other way:
They’re betting against the rally.
Buying cheap Puts (bets it’ll fall)
Selling Calls (bets it won’t rise more)
Option exposure: ₹32,000+ Cr
That’s 7.3x bigger than the stock positions they bought.
They don’t care if they lose a few crores on the stocks.
Because the real money’s in the options.
Phase 2 — Afternoon Avalanche
Time to flip the switch.
Jane Street starts dumping everything they bought in the morning.
Fast. Aggressively. Below market price.
What happens?
Stocks fall
Index drops
Everyone else panics
And while everyone’s losing money, Jane Street’s options? Printing cash.
That day, they lost ₹61.6 Cr in stocks… but made ₹734.9 Cr in options.
That doesn’t look like ordinary trading. And if SEBI’s allegations are proven, it could go down as one of the most sophisticated expiry-day setups ever seen.
According to SEBI, this pattern allegedly occurred on 15 different expiry days.
Tactic #2: Marking the Close (aka Index Botox)
This one’s sneakier.
On some expiry days, Jane Street barely does anything all day.
But in the last 45–60 minutes before market close? They show up with bags of money and a very specific plan.
Two versions of this:
A. The Bear Attack (e.g. July 10, 2024)
They sell banking stocks hard in the last hour
Push prices below LTP (Last Traded Price)
Index drops fast
Meanwhile, they’re holding a ton of Put options that make money when the index falls.
Boom. Profit at close.
B. The Bull Lift (e.g. May 15, 2025)
This time, they buy NIFTY stocks like they’re on fire sale
Push prices up into the close
Why?
Because they loaded up on Calls earlier.
So when NIFTY closes high, they win. Again.
Despite SEBI warning them in February 2025 to cut this out, they allegedly did it again in May.
Why SEBI Thinks This Wasn’t “Just Good Trading”
SEBI’s report drops hammer after hammer. Here’s why they think this wasn’t fair play:
1. Fake Signals
They pumped the index up with stock buys only to dump it later. SEBI argues that’s not strategy — it’s deception.
2. No Real Reason to Trade Stocks
They lost money on the stocks every time. Why do it? Because the real goal was to move the index and win on options.
3. Retail Got Tricked
Retail traders thought the market was rising — so they bought Calls. Only for the index to crash later.
Jane Street was allegedly betting on that confusion.
4. Small Moves, Big Payouts
Because options are leveraged and liquid, a small push in the index meant a huge swing in option value.
5. End-of-Day Gaming
Marking the close — influencing the final index price — is a huge red flag for regulators.
6. Ignored Warnings
Even after SEBI (via NSE) said stop… they allegedly kept going.
7. Loopholed Their Way In
FPIs aren’t allowed to do intraday cash trades. So they used a local Indian entity (JSI Investments) to do it for them.
The Result? Crores on Crores
From Jan 2023 to March 2025:
₹43,289 Cr profit from index options
₹7,687 Cr in losses from stocks/futures
SEBI said they repeatedly took losses in stocks to fuel much bigger wins in options — like paying rent to live in the options market.
So, What Now?
This isn’t a Netflix drama. This is the real Indian stock market. And SEBI is still investigating.
Jane Street hasn’t been found guilty. They’ve responded to SEBI. Legal process is ongoing.
If SEBI’s claims are upheld, this could become one of the most high-profile expiry-day manipulation cases India’s ever seen.
It’s a reminder to all of us:
Just because it looks like smart trading doesn’t mean it’s fair trading.
And if you’re holding options on expiry day? Remember — someone might be moving the market just to make your options worthless.
So read the fine print. And watch the tape.
This game isn’t always what it seems.
Disclaimer: This article is based solely on allegations outlined in SEBI’s Interim Order, which are not yet proven facts. Jane Street has denied wrongdoing and is entitled to due process. This content is provided for educational and informational purposes only, and does not constitute legal or financial advice.