Impact cost for large orders

F&O
1

When placing an order for an option contract, we see very few quantities close to LTP offered for buying or selling. Then how can one place an order for say 5000-10000 quantity in Nifty or Banknifty without incurring large impact cost?

2

Are you looking at popular, i.e., strikes with high OI change during market hours?
For those, I usually see 5000 or more quantity within a 1 INR range.

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3

place limit order for sellers asking price or few points above buyers price, arbitrage bots will fill your order.

never place market order for large quantity, price will jump, you may end up paying even 1000 rs for 10rs option. happened in bank nifty to some guy last yr.

also make sure you trading right contract.

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4

impact is pretty less for nifty, bn options… used to trade big size in a go and rarely faced big impacts with market orders

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5

Thanks. I am looking at ITM/Deep ITM Strikes of about 500 premium in monthly expiry.

6

Thanks

7

What size contract you traded at that time? I am thinking of 10000 quantitues of 500 premium.

8

And is it ok to place market order when exiting positions, or you have to place limit order there too to reduce impact cost?

9

used to trade 7000 bn 18000nf/fn last year with almost 0.5Rs impacts on expiries… now the thing with expiries these days is if you get caught in a spike you can get some pretty significant damage pretty fast… depends on what slicing tool you are using… i used to use the one from Consolecoder… no harm in exiting via market orders with these stable indices of NSE… FN is still a good 50-50… midcap can be a disaster since the components are very easy to move(manage). won’t touch bse options as i have failed to understand how they behave

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10

its safe to use limit order for both. i personally use market order only during final hours of expiry where algos trades in huge quantity on ATM and OTM options.

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11

attaching a sample 1minute footprint chart(executed orders) for ATM 24300CE. volumes were good even on a low volume day like Muhurat trading day. its highly liquid. problems start when you want to trade 2,5,10k lots in single go…need much better execution algos for that

nifty24300cefootprint
nifty24300cefootprint1569Ă—909 167 KB

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12

Thank you.

13

Thanks