I have placed a Bank Nifty buy option at market price and as per my observation, order has executed at higher price without the sufficient money in my trading account. How does it possible?
Yes, its possible if you have placed a buy order for options @ market rate. When a market order is sent to exchange, the software validates the availability of funds to (QTYBEST OFFER) which in case was available as a result of which the trade will execute. For e.g. Say you have 60,000 in your account & placed an order to buy 5000 qty @ RS 10/lot. Margin computed by software is 500010 = 50000 which is available in your account. Once the order is accepted & if the contract is illiquid the order will execute at different price range. After the execution of the order the average buy price will be more and the account may resulted in a debit.
Market orders will check for LTP x quantity/leverage (if any leverage is applicable).
If that matches the amount in your trading account, order will be sent to the exchange by the software.
Once market order is sent, it gets executed at LTP or at higher prices, resulting in successful trade confirmation. If your check your final executed price x quantity/leverage, your account should ideally end up in negative values. You should pour in more funds later to cover that negative value. So always try to issue market orders only after market settles for sometime.
In AMO, if you place market order for options, it gets haywire and gets executed at unexpected prices.
This is because margin requirement is calculated on yesterday’s LTPxqty, so it will allow market order to pass through, but best available price during market opening could be anything based on what counter party has set the limit order. You may end up buying option at higher values and ending up in negative account balance.
Currency trading is a very profitable investment opportunity, but the innocence and lack of facts in foreign currency trading makes basic a little fearful about the whole matter in trading.
Praveen, Rs.10/lot is like, if I place limit order. Here, it’s a market order, So how does the margin calculated?
As i know & understood margin required for option will be LTP * QTY provided you have margin for that it will execute. In case of limit probably it may not execute full qty which you have placed because of price condition. There is a couple of case on Bank nifty options buy execution beyond margin available.