Hi Nithin/Zerodha Team,
Going through Nithin’s post here on risk:
What are the underlying risk on BO and CO which are typically closed around 15:20 (unless automatically triggered with stop loss or profit target)? Typically cover orders are highly levereged - for a nifty50 script it’s around 20.8 times because BO/CO are always associated with a SL amount which is typically maxed at 1.5.
My question:
When I buy a stock say TCS as a CO for 1 lakh margin with 1% SL - I actually am buying TCS shares worth of 20.8 lakh and risking maximum of 20.8K(+any impact cost). My understanding was - when I cover order is placed, it is placed at exchange level and zerodha or any brokerage doesn’t have anything to do on the closure of the trade. My question is - what could go wrong further in this case?
- Could it be possible that CO/BO are not squared off by EOD or SL triggered in any unforeseen situation?
Hypothetical situation 1: TCS goes down by 5% and somehow my position wasn’t closed - could this be a very unlikely but probable event?
Hypothetical situation 2: Zerodha loses all connectivity with exchange at 3:00 PM till market close and TCS goes down 5% after 3:10. What happens to my position?
- What could possibly cause these type of event? Can brokerage infra failure cause this type of issue?
- Are traders protected under these kind of ‘black-swan’ incidents?
- What other risk excess to SL(+impact cost) I should be prepared after executing a CO/BO (however unlikely that might be) ?
Last but not the least : I have highest regards for your platform and the way you are revolutionizing the trading environment in India. Your tech team is one of the best - they are truly world class. Other trading platforms to zerodha are horse cart compared to F11 in terms of technology and vision. But I would like to understand and minimize any possible issues that might arise which is within or outside my control.
All the best once again!