Kotak Mahindra Bank Put Options Skyrocket Amid RBI Restrictions, Investor Nets Rs 20 Lakh

The share price of Kotak Mahindra Bank plunged nearly 11% on April 25, following RBI’s decision to prohibit the bank from acquiring new digital customers and issuing credit cards. However, amidst this downturn, the appreciation of put options on Kotak Mahindra Bank has captured significant attention on social media platforms.

A trader’s post revealed staggering returns, with short contracts witnessing an extraordinary surge. For instance, contracts such as KOTAKBANK APR 1700 PE saw an increase from 20 paise to Rs 60, marking a remarkable 29,900% appreciation. 

Similarly, KOTAKBANK APR 1660 and KOTAKBANK APR 1680 PE contracts soared by 34,000% and 71,600%, respectively.

This surge in option values followed the RBI’s intervention, which imposed restrictions on Kotak Mahindra Bank’s digital operations and credit card issuance. While the sharp appreciation may seem unusual, industry experts explain that it’s a result of the significant drop in the stock price coupled with the options’ low base value prior to expiry.

Analysts anticipate that the RBI directive could adversely impact the bank’s retail business and investor sentiment. Jefferies brokerage highlighted material gaps in Kotak Bank’s digital and security platforms, similar to actions taken against HDFC Bank in 2020. 

They trimmed earnings projections and adjusted the price target, maintaining a ‘hold’ rating amidst uncertainties surrounding the resolution timeline and potential revenue impacts.