How to avoid freak trades in Options?

F&O
21

And people are saying since yesterday that place limit order instead of market orders. .wow this is next level.

22

This looks like serious NSE Glitch!!

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23

Omg, this is very scary. Traders trust in system would be lost.
@siva-reddy , @nithin : Can you please clarify?

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25

Give it sometime, Nithin will be writing a post on this soon.

26

Why SL-L triggered at market?

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27

Let me check on this.

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28

Do check and let us know.
Was very surprised to see limit order get executed at those levels.

Link to that tweet

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29
  1. i think it is only a market order, the stoploss for 16450pe put position is kept at SLM, so the user might not be specific to place a sl-limit order for call position. for more images regarding the position you can view the twitter links shared in above posts.
  2. the other point i find is price shown as 168 is last filled price, as the user had his fill at average price of 422.8 with 2 lots , 422.8*2 = 845.6 which should be subtracted by 168 [845.6-168 = 677.6, so 677.6 is the other fill for 1 lot and 2nd lot had a fill at 168.
    still i may be wrong.
30

You are right about average price(168+677) but how can the order type be shown as limit?

31

Once SL is executed it shows as limit only, you can try tomorrow for 1 share, but here price is there, so user might have placed sl limit initially and then modified it it sl market. Need to check order history, I have informed team.

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32

Ok siva thanks for the clarification.
Waiting to hear about it.

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33

Hi Guys, I operate Banknifty , Nifty straddles with algo, i want to handle freak trade scenario in my algo. I am trying this , let me know if this will minimize this problem assuming this is not happening with all strike prices:

Checking Option chain for CE → Ltp/ Bid and Ask prices should be in descending order.
Checking Option Chain for PE → Ltp/ Bid and Ask prices should be in ascending order.

I don’t keep SL in system , its resides in my algo which i run every 10 sec.

34

Seems this is a rare case, order is sl market only, one lot is traded at 677 because of freak trade and hence full orderbook is cleared with no counter party, hence it turned to limit and 2nd lot is executed at 168 with avg as 422.

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35

That probably solves it.
Market orders should not be allowed in options anymore.

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36

How can market order be changed to limit order arbitrarily by the system? In this case, it’s good for him, but isn’t that system fault?

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37

what happens is when the orders breaches the circuit limits all the existing order in order book gets executes till the order book is finished( even at higher price then circuit LIMIT) then after order books gets finished it become LMT order at Circuit by exchange( no new order is taken above circuit limit).

This is mentioned by NSE senior VP in below interview for Nifty Future freak trade :

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38

If there was no counter party market will turn to limit but point here is about 100 rs option trading at 800 because of freak trade.

39

I love the sense of casual air about one order got executed at 677, SEBI has issued no clarification whatsoever, do you guys really think that someone in right sense of mind would trade anymore if one or two more such incidents are reported. Yes people die in surgery but who would go for a surgery that can kill the whole family altogether. .I mean Rs 80 thing getting filled at Rs803 will kill the traders vibe to trade thats for sure. .

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40

IS TER removed by exchange? This would have avoided if that Execution range in place

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41

Yeah, removed from Aug 16th.