Why Stock Option buying with market orders not allowed at Zerodha

#1

Why stock options can’t be buy at market price with zerodha. If it is possible with index option then it should be with stock options at least which are more liquid. Today I tried with Infy cal and put but in Kite and Pi it wasn’t possible. I then do call and trade first for buy and at noon for sell. Is it trick to get more brokerage…? How to buy it any ways in PI or Kite.

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#2

Let me explain with an example why we don’t allow market orders on stock options

Assume stock X is trading at Rs 100. I decide to buy 110 calls of this month (lot size 5000). You add 110 calls that you see LTP of Rs 0.5 on your watchlist. I am in a hurry to buy this call and decide to place a buy order without looking at the market depth. I decide to buy 5 lots, knowing the maximum I will lose is Rs 12500 (25000 x 0.5).

Assume only 1 lot is being offered at Rs 0.5 and the rest 4 lots at Rs 5 (this is an illiquid contract). Now, 1 lot gets bought at Rs 0.5 and the rest 4 at Rs 5. So suddenly instead of Rs 12500, Rs 1,02,500 gets blocked in this trade ( 0.5 x 5000 + 5 x 20000). If I want to sell it immediately, the best offer is around 0.45. I just lost Rs 1lk because of the liquidity.

You might think that this doesn’t happen often, but it was a daily affair for us when we were allowing market orders on stock options. We have had at least 10 clients complain to SEBI saying Zerodha as a broker is responsible for this.

Even though there is no market, you could just place a limit order to buy at a higher price or limit at a lower price to sell if you want this to be a market order. It will be a market order with maximum protection (which is your limit price).

We will not be able to support market orders on stock options buying for the same reason mentioned above.

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#3

I am also facing the same problems as stated above. This is a big hurdle for intraday trader, where every second is important ! Phone calls also takes longer time to attend and charged also for trades.
Please resolve above issues urgently !
RV0619

#4

Thnx Sir ji … I ll try it tomorrow onwards. But the problem is when you know the result is bad you need to square off your stock / call buy order imdt. you can’t look always at CMP and place limit order regarding that coz it changes every second very fast after result/news announcement. Market order not only save money but can make large profits. You was trader so you can understand what I am telling so please enable market orders at least in high liquid stocks.
…and yes Please attained calls imdt. esply at morning session. I already make Rs. 15,000 on that trade with almost zero risk hence extra Rs. 20 is not a big deal whats imp is trade should be done timely. These opportunities never comes every day.

#5

Hi Nithin

Instead of forcing clients to not use the mkt order facility for stock options why cant there be an option for users to choose whether they wish to have mkt order enabled for stock options? This way clients who approach SEBI on this issue cant take umbrage anymore.

#6

You didn’t look at the other angle in this. Same example as above

Assume only 1 lot is being offered at Rs 0.5 and the rest 4 lots at Rs 5 (this is an illiquid contract). Now, 1 lot gets bought at Rs 0.5 and the rest 4 at Rs 5. So suddenly instead of Rs 12500, Rs 1,02,500 gets blocked in this trade ( 0.5 x 5000 + 5 x 20000). If I want to sell it immediately, the best offer is around 0.45. I just lost Rs 1lk because of the liquidity.

If client doesn’t have this Rs 1lk extra in his account, money gets debited from the broker immediately. He has to then recover this from the client separately. The risk is quite huge on this.

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#7

Very satisfied with your answer.
You people are doing a graet job

#8

how can it debit from your account if he does not have money to buy that value of contract ? order would simply be cancelled right?

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#9

A suggestion : In market order, zeroes should manage to use market protection % at that particular time for their trader. This way they draw a boundary to protect from abnormal prices.

#10

if the client doesn’t have the money for buying 5 rupees contract how the order is processed ?