I have been trading in options intraday. Of late i have been trying to avoid buying options, due to inability of putting accurate stoploss.
Most of the available platform doesn’t have SELL-MARKET, and we need to put limit order.
I observed, lets say Nifty 10100 CE brought at 105. I place STOPLOSS-SELL order with trigger price 100, and limit price 99. Most of the time, when market reaches 100, the order goes to pending state, and i am in more loss than estimated.
I am afraid, if i put a limit price too lower than trigger price, my options would be always in lower than market price (top 1 offer), and will get sold immediately at a larger loss. Is this assumption true? Or does it always gets sold at best bid only? Like if best bid is 99, and i sell at limit price 95, it gets sold at 99 only? (Irrespective of the fact, that i put limit price 95.)
Adding: Does zerodha-kite support SELL-MARKET order for Nifty options? (Or we need limit price always.)
If you are trading index options (Nifty and Banknifty) we allow both market and stoploss market orders. It is not allowed for stock options because of liquidity issues.
Coming back to your question on if you place a limit selling order below the current price, how is the behavior.
It works exactly like a market order, but also ensures that it doesn’t get executed below the limit price.
So if best bid is at 99 for 1 lot, and you sell 1 lot, it will get executed at 99. Assume the bids are like this
99 - 1lot
98 - 2lots
97 - 1 lot
96 - 1 lot
90 - 10 lots
If you place a sell order with limit 95 for 10 lots. 5 lots until price 96 will get sold and remaining 5 will become pending, market depth will look like this after that.
90 - 10 lots B 95 - 5 lots S
If you hadn’t placed a sell with limit at 95 and placed market. the remaining 5 lots would have gotten sold at 90.
So using limit gives you market protection which market orders don’t.
@nithin Thanks a lot Nithin, now its crystal clear.
So, to summarize my understanding from what you mentioned, for options the best bet to get my order cleared (and almost act like SL-M), is to put limit price much lower than trigger price.
Again, if i need to have 2 orders: 1 stoploss, and 1 profit-target - For 1 quantity options buy, it will need to have additional sell-margin right=1 lot futures (For that extra one) ? Because i have only 1 buy, and 1(stoploss)+1(profit)=2 sell?