Comment on Stop Loss orders - Limit/Market

Nithin Kamath commented on 02 May 2013, 08:49 AM

Pradi,

Your’s is a common query, When the option is trading at 45,

1. yes you can place SL-M order with trigger at 43.
Yes you can also place a normal SL order with a trigger of 43 and limit 42.95. The only risk you carry of having a limit price is that if the market goes fast against you, it is possible that the limit of 42.95 becomes a pending sell order. Otherwise no issues as such.
People who say that you have to place trigger below the buying price are wrong, you just have to place it below the market price currently(i.e 45 in your case). If you place it above 45, it will get triggered immediately and your order becomes like a normal selling limit/market order.

2. When you have already placed the stop loss order and now trying to place another exit order at 50, only in case of options do you need extra margin. The reason for this is because margin required for buying/selling options are different unlike equity or futures. In your case, you will need the margin required to short an option to place a second exit order.

Cheers.

View the full comment thread »