What is the brokers limit in value on a particular strike price to accept orders ?
If you plan on intraday, this number is not practically relatable.
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What about F&O ?
I meant F&O intraday. You can’t trade with more than let’s say 6-7 crores even on your best day. Again, I specifically mean Options.
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What is the reason being…?
You would become mostly one-sided buyer. Since limit orders may or may not work for you, managing such big accumulations and distributions won’t leave a profit margin for you. Also, risk would increase while reward is already decreasing.
On an average day, you would need to anticipate daily movement magnitude and then size your position accordingly such to achieve a good R:R ratio.
If this stands true, then is it with one broker or with multiple brokers ?
Alternatively, Can I trade F&O with 6-7 crore with each brokers (Zerodha, Groww, 5Paisa…) ?
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It doesn’t matter how many brokers you have, it’s not a broker limit. It’s a practicality limit. Think of it in orderflow terms, how does market work? Your accumulation will be a big trail, so will be distribution, now if the middle part doesn’t have good momentum, how would you profit? And suppose if market goes against you, how much would be your loss given the big trails of accumulation and distribution?
Therefore size your position accordingly your anticipation of daily movement. On some days you would even trade with 25-30 lks only.
In practical, how much, in value, is traded at a call strike price on a day ?
If that amount is really big then, how my 6-7 crore trade is not practically relatable ?
Suppose I am out of the market. There are 20 independent traders with Rs 40 lakhs each (Rs 8 Crore). They take Call options. So,
Are they gonna face same situation as mine and suffer mostly losses ?
It isn’t really about how much money is being put than how much money is moving the market. Market’s turnover can be much higher than yours, obviously, but market movements are important, not turnover. I mean, 200 crore turnover on a flat day isn’t what you want, do you? Same again for “many traders”, if that 200 crore turnover came from only 10 traders and neither side did it move, what would you do? If it moved higher, they’d make profit, but a 40lk position isn’t really much debatable as it’s really far from the 6-7 crore of safety cap I let you know of.
EDIT: Those 20 traders aren’t single person, that’s not a Point Of View you want.
40lk position ? Explain
They’re 20 independent traders and thei individual position is 40lks, as you said, I can’t explain in words as of now as to why that’s not a point of view you want.
The open interest limit for brokers is 15% while at the individual level, there is a client-wise limit of 5% of the total number of all derivative contracts. Explained here:
@ShubhS9 : The rule states that “There is a client-wise limit of 5% of the total number of all derivative contracts for the same underlying and a 15% limit on open interest for trading members (brokers)”.
a) Wrt options, is this limit applicable at individual strike level or on overall OI for NIFTY CE for a particular expiry. Say 20k strike NIFTY CE (Aug 2023 expiry) has 1,00,000 OI and total OI for NIFTY CE (Aug 2023 expiry) is 30,00,000. So if someone is trading 20k NIFTY CE, will the restriction be calculated as 5% of 1,00,000 or 5% of 30,00,000 (since restriction considers all derivative contract with “same underlying”, the underlying is NIFTY index here and the strike price is immaterial to the wordings mentioned in the rule)?
b) Does Zerodha’s RMS check for this 5% rule at individual level / 15% rule at broker level when orders are punched in by user? If the trade results in a OI exposure above 5% / 15%, will the order get automatically rejected?
Thanks.
Why not? I know so many of them with even bigger amounts trading in Fno.
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He can, if he can manage it. I misphrased myself.
Yes. Expiry day underlying contract.