Stop Loss Problem

Placed an order with Alice Blue through telegram bot to sell 2 lots of BN options

Immediately, I also put in a SL-M order for both my CE and PE

2 mins later BN shot up, triggering my SL-M order for CE

But, in the order book it shows that order as limit order which got cancelled

Ended up carrying the CE

Here is a tricky part on BO, CO, SLM orders which no one discusses -

In CO order, lets’ say, You write, SL at 168. It means it will throw a reverse order to the current trade and therefore, close the previous trade.

But let’s talk about in detail of the mechanism.

SLM at 168 or CO order with SL at 168 means - When the instrument’s price is 168, throw a market order.

The obligation is to fire a market sell order when your SL is hit. There is NO obligation that your order which is SL will be filled. It will follow the course of a normal market order which means, Your order can get rejected for n number of reasons, like -

#Circuit

The options price has hit the circuit. If BankNIFTY moves sharp, and you have deep OTM options (and, also application to near OTMs too) it is bound to hit circuit. All orders will get rejected there and worst case, can trigger at a very very high price.

Here is one example -

If there is a fundamental event like the tax cut announcement, that adds an immediate risk premium and even a 300-500 pointer move to the upside will inflate the premium and hit the circuit.

#No Seller/Buyer

If there is no buyer or seller for your order for a brief period, the order will get canceled. Now, what are the chances of someone selling put options when BankNIFTY is falling rapidly hitting your stop loss?

Order will get canceled due to a lack of market participants for that brief period. The account can go into debit balance and You can end up getting sued from the broker with interest on the amount that is in debit.