May 6 ,2010 Flash Crash lasted over 35 mins.
Nothing is impossible , in this era of high technology we are still facing freak trades. So it is obvious that we can face flash crashes in upcoming future.
During this event ,some of clients will face negative balance . Not every client hedges thier intraday positions 100 percent. The question is that “Will zerodha close the position of these clients at the worst possible condition ???”
(For those who don’t know , if your account has a negative balance , ZERODHA RMS BOT will close your positions at worst possible time.)
While today the chances of fat finger trade are much lesser due to restrictions on maximum value per order, flash crashes are possible in any market and at any point. Flash crashes can happen when everyone reacts immediately to a news item which could be fake, so the market can crash and then bounce back immediately.
This crazy margin system of india make hedged option trades useless in the name of systematic risk as ROI become very less so people speculate and increase earning of brokers (algo trading) and exchanges yesterday only nse had concall what a fantastic margin by carrying no risk at all,this clearing corporation are also afraid not allowing any one to check their books (EU regulator removed 8 CC from thier approved list)
Yeah, although the possibility of fat finger trades exists (chances being lower than before), having SL (limit) orders helps us escape with minimal cuts. Check this Z-connect post out for a detailed explanation on freak trades
All this stuff is way to complex y not put system in place where you pay for whatever maximum risk you are carrying to the underlying forcing to close the trade just becasue you dont have money to pay for exposure margin even though you are fully hedged