Options Writing - Stop loss info

F&O
1

While writing options - can the order be created as a stop loss order - or do we need to watch it and manually trigger the square off? Is there a possibility of not able to square off/exit (buy back the sold options) if no buyers are available to sell back before expiry?
Also does a Stop loss options writing order have any impact on the Margin (or as there is no guarantee of square off/exit it will still be treated as unlimited loss and hence no impact to margin)

2

After shorting option you can put Buy SL order (remains valid for a day) or longstanding GTT order which will square-off your position but not sure about impact on margin. @Siva, can you clarify.

There is possibility of this in illiquid stock options, hence suggest you to trade only Nifty and Bank Nifty options which are most liquid.

If you are new to Options, suggest you to learn Option basics on Varsity.

1 Like
3

Thanks for the GTT order details

4

@Siva - Could you pls clarify the margin question?
More detail to the question

  1. There is no actual stop loss for a options write order
  2. As @ShubhS9 explained the stop loss itself is creating a Buy SL / Buy GTT order
  3. Since this Buy SL/ GTT order is a trigger order then the short options order is not hedged at the of placing it so there should be no impact to the margin
    Is the above understanding correct?
5

Your understanding is correct. Putting Stop-loss doesn’t hedge your position, it’ll only limit your losses.