Dan interesting and informative post. I was just reading the views around, and after your comment, thought let me add some of mine.
* Big players can or try to manipulate the market - if it is not too liquid. But at the same time, they too can lose millions - or billions of dollars as J.P Morgan found out at their London trading desk. Total loss? US$ 6.2 Billion.
http://www.bbc.co.uk/news/business-23692109
* How Big players place orders - Algo's slice up the order - and these are routed thru different brokers - and not at one time to one broker.
* Big players are aware that their orders are being watched - So they may send out big sell orders first before the buy order - and if brokers are following them and join, the sell order can be reversed with them or other broker to buy in double / triple quantity. So at times brokers following funds can also lose money.
* At times big funds buying a puts is not being bearish. On the contrary they are bullish in futures, and hence are hedging their position by buying puts. Vice versa when they buy calls.
* Another technique used by big guys is to place a large order with prices to the broker and cancel it fully before execution or midway.
* Having said that, big players - read hedge funds have annual conferences where they discuss ideas - with a view to get others on the same side of the trade to everybody's benefit. (Happened when George Soros bet against the GBP and made a billion dollar in a day) All other funds were given the same information and the combined might of the hedge funds together bet against the Bank of England.
http://www.telegraph.co.uk/finance/2773265/Billionaire-who-broke-the-Bank-of-England.html
* Stocks futures are much easier to manipulate. Hence for traders, unless they are sure, its better to trade in the index or largely liquid scripts.
* In the market such as currencies and commodities and largely held stock or futures especially if it is liquid - it is difficult to manipulate by one or a few player.
* Sometimes even the operator who is manipulating an illiquid stock or index can find that the tables have turned and instead of dreaming of making a bundle, in reality he loses his shirt - or shorts
* To summarize Gaps = Huge liquidity. If it sustains, it is genuine. Else, it can be taken as a means to push the market.
@Onlinegtrash
An explanation in a nutshell you can addapt to your market:
Goldman Sachs and other player sometimes come in with an order of 2000 or more atm or otm options in the S&P 500. If we are able to see that order size and to see if this are put or calls, we know that Goldman Sachs know something and we can anticipate a move in the S&P 500 according to the information given thru the put or call. (I will come to the stragies played at the end of this post)
If this happen on a specific share with not to big volume, it is very clear that the share is going to move very soon in the direction of the bought or sold option. Broker houses have the tools to watch the big guys 24 hours a day and according true that information they have an advantage and can play the game a bit in another way. Every big broker in the States has such screening software for the biggies, so your big brokers and banks should be in the same situation.
The S&P500 is huge, so not even GS or other big players can manipulate much. Another case are the stocks. Here GS and other big players clearly can manipulate the direction of the price just by the volumes (USD) they are able to spend for such orders. (But is the word manipulation absolut the right word or maybe not?)
Another example are certain future markets. Even smaller traders can become market makers through the size they hold in lots and the price of bid or ask which they are willing to offer to the other participants. Stuff like mention from Mr.G is out of question, as market participants are not stupid. This game has nothing to do with inverstors nor is it a game for children and would like to be; instead a game for very hard calculating and very fact oriented people and traders with no mercy for their counterparts.
I am not sure if in Nifty someone is able to manipulate the whole market. That is why I wrote Millions are not the case. But as you now say that it would be possible, so then it would also be easy for the big guys and brokers, who watch each other, to know who this would be. If one of the big players would know that from the other big player and the whole game would be to his disadvantage because of that manipulation from that specific company, he would act for example by looking for other big partners to get revenche on that specific company. Happens in the past when G. Soros was put out of a huge game in a speculation against the currencies of a certain country. The big boys stood together against him and in that specific case he lost huge sums of money.
In the share market any big player can for example hold a huge bunch of shares from a specific company. If they now decide to sell that huge amount of shares to their customers or to the public for whatever reason, they will surely buy puts to make further profit on that share, as when selling huge amount of shares in a short time, the price of the share will fall. Not in all cases, but read on. Is it manipulation? As mentioned in one of the post: Difficult to find out. It is my right to hedge my position for whatever reason. The one who offers in this example the shares to the public did not force others to buy them. So instead of manipulation we also could say: Tactical game.
So the strategies used from all the big players include small market makers are very simple at the moment they know what their orders can have for an impact in specific markets with specific derivatives. Big guys and others who ever have been market makers in any kind of such market know that impact very precesely, otherwise you do not get in that position and stay there. So the hedges are from simple like synthetic put and calls to more complicate with three legs like calendar collars or the use of LEAP options.
Now if this gives any answer to your thread title, you have to decide by your self. But at least you got some more information and thoughts which surely are worth to discuss further in your thread if needed.
Take care / DanPickUp