How to avoid freak trades in Options?

As most of you know today, NiftyAug14650CE had a freak trade today.
https://twitter.com/fergie_faithful/status/1428648590696583168?s=20

Below is the screenshot for this.

My trade was executed at the below price. I was lucky that I had only 6 points slippage instead of buying at day’s high: 803.


I would have been saved if the TER (Trade Execution Range) was in place.

I would like to know how to avoid these kind of slippages. Questions to Zerodha:

  1. Why was the order at 803 executed though Upper Circuit was
    518.2?
  2. How long did this freak trade last? I’m assuming not more than 2 seconds. This would help me to build my own system where I fetch the LTP using kite. trade every 5 seconds and then place market order. I understand that these trades are not captured in market charts of OHLC. ( Why are the OHLC values on daily and hourly charts different? (zerodha.com))
    This freak trade would not be captured in ltp either if I poll LTP every 5 seconds
  3. I understand SL-L order has other problems as I will have to monitor the positions. There could be chances that I would never get the fill. E.g. if I place buy trigger price as 135 and buy limit price as 140 and the option jumps to 141 and stays there, then my trade would never get filled. Is there any other alternate way I could avoid these kind of freak trades?
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Yes , didn’t understand why this got removed . No reasoning for the same.

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Sometime ago some ppl were shouting that why freeze happens and why orders gets cancelled by exchange and now different segement ppls problem.

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This slippage is due to lack of option sellers I believe, and it’s going to be horrendous once the 100 percent margin becomes applicable on options selling. If someone sells than only someone can buy, but now every trader has become option buyer I guess. So if someone says I will sell at 800 rs an option worth 86, take it or leave it, the buyer has to buy(in market order).

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@nithin , is it possible to disable market orders in Options including index ones till there is any clarification from exchanges , this is just the starting after nse removed execution ranges in FnO.
It might be a systematic risk to both client as well as broker??

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How this will help you , you can put limit orders right?

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If we put limit orders, there’s a chance that our orders would never get filled.

  1. I understand SL-L order has other problems as I will have to monitor the positions. There could be chances that I would never get the fill. E.g. if I place buy trigger price as 135 and buy limit price as 140 and the option jumps to 141 and stays there, then my trade would never get filled. Is there any other alternate way I could avoid these kind of freak trades?
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Anil if you will disable market orders and not use limit orders, than what else way of filling the orders is left?

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I understand what you are want to say , even we make extensive use of market orders in indices , but this thing (freak trade ) is a result of removal of price execution range in options ( you might have experienced ‘price is out of current execution range specially in banknifty expiry) , though this was problematic but it prevented from freak trades like yesterday happening.
What according to you is a way except to use limits orders rather then markets , imagine if someone placed market in nifty at around 2:20 . Anyways brokers should take it with sebi and exchanges as soon as possible.

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Guys check out this video, this guy says 250cr loss created in fraction of a second in the 16450 ce option, what is happening here guys, how will someone trade knowing this is happening. A few days ago a 2000 rs worth option opened at Rs 1 and than went back up to 2040 in fraction of seconds. Has SEBI lost control totally or is the absence of retailers due to margin penalties now showing effect. Who is accountable for such freak show losses?? Is this not criminal liability?

@Anil_Kuppa Was the loss in an option buy trade?

If yes, who was on the other side? Is it possible for sellers to have an order in the book that far away?

You should definitely file a complaint.

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Anil the problem is not in execution, the problem is lack of participants, nobody now wants to sell options as they do not have exorbitant amounts to cover their positions, and the penalties and all are making them stay away. The sellers are now big institutions and they know the retailers are at their mercy. They will sell 80rs option at 800rs and you can’t do a thing about it, moreover the execution range has been removed so they will place orders for 2000rs sell also and your market order will have to take it. This is a black day in history of trading and no one is doing anything about it. Zerodha should take up this matter as they have 80 percent clients and maximum weightage.

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Vivek the other side was those who can still afford to sell options. This is it guys, hanging my towel now can’t trade anymore. On friday I stayed away and now plan to stay away till something is done to bring back retailers into selling options.

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Here is the news and than SEBI response, everything is normal as per them.

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We are doing something about this. Give us a couple of days. I will share details here soon.

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@nithin Sir you only can solve this problem .The total traders community will be thankful and
grateful to you forever…

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Until this issue is resolved, better to stay from ATM options as these freak trades are more common with ATM options.

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july 5 & july 28 freak trades happened on nifty jul & nifty aug futures respectively. So maybe one should stay away from futures as well

all freak trades since july

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@nithin sir please retail traders ko bacha lo sir, aap hamari aakhri hope ho, aap dekho margin khatam honey se kitna manipulation badh gaya hai, agar 80rs ka order 800 mai bharega toh retailer khatam ho jayega sir. Really hope you take up leverage issue with SEBI alongside with ANMI.

There is a problem with limit orders too.
Any explanation for this?
@nithin

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