If I have cash say 4000 in my trading account and I place an AMO order for an option as Market Order.
The next day when market opens, the order gets through with a whooping 6000 rupees swiped out of my account, leaving -2000 in my account (negative). So I had to pour in more funds afterwards.
Why is this happening?
I thought, my order will get executed only if I have the necessary funds for that position.
This happened to me recently. Could someone explain please?
When you place an order, the RMS system of every broker blocks a certain amount of money for the order you’ve placed. The amount of money that has to be blocked will depend on the LTP of the contract as this is the only reference price available for the system to block funds.
Assume you place a market AMO for a Nifty option contract whose previous day LTP was Rs.60, the RMS will check if you have 60*50 = Rs.3000 in your account. If you do, then it allows your order to go through at market price.
Correction: The funds are blocked based on the bid/ask depending on the type of your order. AMOs are validated based on previous close price of the contract.
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If my order is the first one to execute (Twice in last week I have seen my price as opening price), then will it use the LTP@3:30 pm on yesterday’s price or the closing price of yesterday (average last 30 mins value)?