Such a move has been taken by the exchange as a measure to prevent erroneous order placement, the exchange said in a circular late Thursday.
“It’s a step in the right direction to avoid instances of wild swings in options premium due to freak trades,” said Shrey Jain, founder and CEO, SAS Online.
The decision comes in light of a recent instance of wide price movement in Sensex call option of 67,000 strike on September 8, on account of Stop Loss Market Order (SL-M) without due price protection.
Due to a market order, the premium that was trading at Rs 4-5, shot up to Rs 209 for a few seconds, and a lot of traders faced losses due to this, Jain said.
Following this, the exchange had issued an advisory on September 15 to trading members to be careful while placing orders in order to prevent any errors.
Trading members were also advised to use the protective features in the trading system which can help in preventing such occurrences.Stop loss is one the most beneficial tools that help investors avert huge losses on trades.
Stop loss order means an investor and/or broker sets an automated instruction to execute the sale of security if the price of a stock falls to a specific level to protect them from loss.
Stop loss helps several investors manage all their losses by selling their stocks or bonds if there are chances of the value dropping below a certain level.
In trade on Friday, benchmark Sensex was up marginally 0.1% at 66329.16 points. The September futures contract of the index was flat at 66368.80 points.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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