Does the margin shortfall occur due to MTM loss in naked short options positions? I thought it might occur only when span + exposure on the underlying exceeds funds available.
For freak trades, I am assuming span + exposure won’t change much.
SPAN+Exposure goes up 5 times in a day. So for short options, margins can go up 5 times a day. So a freak trade in an illiquid contract could lead to increase in SPAN+Exposure. But the chances are extremely less.
To add on to it even if the margin goes up, don’t you think it is not possible to be captured in the random snapshot by CC in few seconds or microseconds .
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Yep, like is said, it is almost impossible. But “almost”. 
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For customers who want to trade market orders, we suggest placing limit orders with a price higher than LTP for buying and lower than LTP for selling.
Is this a typo? Shouldn’t it be - placing limit orders with a price lower than LTP for buying and higher than LTP for selling?
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No. If you want to execute Limit order at market price, you can do so by placing buy limit order above the LTP and sell limit order below the LTP.
Since limit order allows you to buy or sell at the price specified or better price, doing as explained above will execute limit order at best available price in the market but not beyond the price specified by you. You can check out this support article which explains it in detail.
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@nithin @ShubhS9 @siva-reddy how do all the exchanges outside india deal with this issue of freak trades in the absence of Trading Execution Range? Can’t brokerage houses like zerodha suggest SEBI to adopt a similar mechanism to get rid of this problem?
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There will be nothing as execution ranges as I know at least in US. Freak trades are result of market dynamics, as a trader user should be using only limit or sl limit at least now, as this is new phenomena slowly brokers and traders will adjust to this.
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For a full time trader who can afford to sit and monitor his intraday option writing trades, how safe is it to not put a stop loss and manually exit using limit order when it crosses your stoploss ?
Samurai. Very very unsafe. The whole point of sl is to cut losses from unexpected moves, when you remove it that purpose in itself is defied. Also by the time u get a signal some sudden move like pfiser announcement of vaccine happened, or SitaRaman candle would have already happened, I would not say that’s a wise idea.
By the way I feel ur pain, that’s what I am also going through now, not able to keep sl at safe distance cause freak trades will bring it down in a second giving huge losses. That’s why I say sl limit is no solution to freak trades. Most of the brain using traders are not able to trade now because no place is safe to place sl.
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Hi @siva-reddy
Q1 ] But lets say at the time of evaluating the bid- ask everything looks fine and after you submit to exchange the freak trade happens in the next 10ms. At that time we will still be affected right? Unless your polling rate is sub 1s? Correct me if I am wrong.
Q2] Is it really possible for bid-ask to change within a 10ms or so?
Q3] Will your system be able to poll at a much faster rate [ as compared to 1s?]
Q4/ If i use trade API will this feature be available there as well
Currency options lack liquidity, I have already checked, the volumes are minute.
No, removed for it as well.
Hello,
Kindly guide me on the impact of freak trade on hedged option position and also SEBI peak margin penalty in such cases.
For example:
Suppose I create a weekly bull call spread or a weekly bear put spread by limit orders.Orders get executed. Required margins get blocked. Everything goes fine. However next trading day there is a freak trade in the strike price.The call that I have sold or the put that I have sold hits the roof for few seconds. In such cases, will it affect my position??? If so how??? Will there be Sebi peak margin penalty???
You are not effected with this in any way. You can ignore it.
thank you
What is it here?
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