Zerodha founders do away with stop-loss market orders for options on NSE

Nitin Kamath tweeted, “From September 27th, Stop-Loss Market (SL-M) orders will not be available for options. NSEIndia is stopping this feature. This will help avoid eccentric trades and mitigate their impact “

what is stop-loss

Stop-loss can be defined as an advance order to sell an asset when it reaches a particular price point. It is used to limit loss or profit in a trade. It is an automated order that an investor places with a broker/agent by paying a certain amount of brokerage. For example, if you bought stock at ₹200 and you want to limit the loss to 95%, you can place an order in the system to sell the stock as soon as the stock reaches 95%. This type of order is called a ‘stop loss’ because you are placing it to stop. Loss more than what you are willing to risk.

earlier in august Nitin Kamati Also suggested the use of stop-loss limit orders over stop-loss market orders, especially when trading contracts with shallow market depth.

“If you have placed stop-loss orders, freak trades on the exchange may trigger your pending stop-loss orders. So if you had bought an index call option ₹80 and stop-loss at ₹70, a freak business ₹50 will trigger your stop-loss order; There is no way to avoid triggering a stop-loss order due to a cynical trade. But be sure to use a stop-loss limit order to make sure your stop-loss order is triggered, not the high impact cost caused by freak trades, he said.

“When trading the markets, some things are under your control and many are not. A good trader will always do anything to minimize risk on things that can be controlled, such as market orders, rather than Using limit orders and using SL on SL-M, especially when trading contracts with shallow market depth.