I had 450/- of free cash… No other holding positions… I placed Vedl 95CE (4000 quantity) AMO at market place at 9:10 am today, whose previous close was 0.05 Paise… With 450 rs ,my order could have placed upto 0.1 Paise .(4000×0.1paise = 400 rupees) … TO my horror it was placed at 0.5 Paise …I,e (4000×0.5paise = 2000 rs) … And when I tried to sell it ,it was trading at 0.1 Paise only… So I lost 1600 rs …
How my order executed at worth of 2000 rs, when I had only 450 rs.
Zerodha won’t give margin for options and anyway I wasn’t placing the order in MIS to claim margin.
So who gave me that extra margin? And how that order got placed?
I asked zerodha , I didnt get satisfactory answer.
Always one should place only limit orders if the contract is illiquid and this is the basic thing to be known when one is trading in markets with hard earned money. I might sound little harsh but ignorance is no excuse. It attributes to lack of self discipline when it comes to trading.
Now we will discuss why the order has traded in spite of no margin but before that one should know how the system works.
For example let the snap quote be like below
Best buy quantity Best buy price Best sell quantity Best sell price
1000 5 2000 6
2000 4 1000 8
5000 3 2000 10
Case1: In the above case if one places limit order to buy 5000 at price of 6 then only 2000 quantity is traded and remaining quantity of 3000 will be pending in the order book. Cash required is 30,000.
Case 2: But if one places market order for 5000 quantity then 2000 is traded at 6, 1000 @8 and another 2000@ 10 taking the buy value to 40,000.
Consider one has 30,000 as cash balance and places a market order as in case 2 then the order is executed at market prices and account will be in debit of Rs 10,000. But logically the order should be rejected but system calculates the required margin as quantity given (5000) * Best sell price(6) which comes to 30,000 (5000*6). It won’t consider the quantity available at best sell price but only takes price in to account.
This is a flaw with the systems itself and the same is with any broker in India. This is the reason why few brokers won’t be supporting market orders itself.
Exchange rules of execution ranges are the reason for above flaws in the systems.
One can check with exchange itself for further clarification on this.
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Right, thats why one should place limit orders only for illiquid contracts.