Can I place a Stop Loss and Target order at the same time in Options and Futures?
Short Answer
You can place a stop loss as well as a limit order together while trading in derivatives such as Futures and Options. To implement this you will have to maintain a sufficient margin for additional orders.
Detailed Answer
How to use a Stop Loss?
A Stop Loss is critical when it comes to derivatives trading like options and futures. A stop-loss helps you to calculate the total risk in a trade so that you can manage it accordingly. By placing a stop-loss order you not only define your risk but also ensure a healthy target against your SL.
By having a target and a stop-loss, your trading activities can get more controlled and much more efficient. But the question arises, "Can I use both together?"
Can you put your Stop loss and Target order together?
Yes! You can place two different orders as an SL and an Exit order.
However, these orders will be considered as two separate buying/selling orders. Hence, you will require to maintain a sufficient margin for both of them.
Let’s take a situation where you go long (buy) on a Nifty Futures contract and decide to place a stop loss 50 points away from your buying price. Correspondingly, you also want to place a target of 100 points to exit the trade.
- Let’s assume you have a total of Rs 2 Lakh in your account. And to purchase a Futures contract you require Rs 1 Lakh. To place a sole stop-loss order, you would not require any additional margin because the order is not to take another position but to exit the trade. Whereas if you want to place an SL order as well as a limit order, you would require an additional Rs 1 Lakh.
- As you have a sufficient balance in your account to cover both orders, you will be able to place your SL and Exit order.
But if your account had Rs 1.5 lakh instead of Rs 2 Lakh, you would not be able to place both orders simultaneously.
Therefore, in order to place both these orders, you should maintain sufficient margin (funds) in your account to cover the costs of both orders.
The logic behind this is, if either of your orders (SL or Limit) order gets executed, then the other order will remain in the system. This can result in another order if you don’t eliminate it manually. Hence to facilitate such an order, it is critical to maintain sufficient funds for additional orders.
Another way around
On multiple occasions, you might not have sufficient margin for additional orders. In this case, you can place either a Stop Loss order or an Exit (Limit) order according to your preference. You can modify the orders accordingly. If your position goes against you, then you can place the Stop loss and if it goes as planned, you can withdraw the SL order and place the limit Exit order.
Ask Your Query for FREE, Get quick answers from our FINTRAKK community!
Discussion (0)
GTT in Zerodha is an acronym for the Good Till Trigger feature offered by Zerodha that lets the investor select a trigger price and a set of predetermined conditions that as and when are met, an order is placed automatically.
With the increasing exposure of the stock markets, more and more people are trying a hand in options trading. Options trading have become a lucrative place for individuals to earn money. The reality is certainly different. More than 95% of individuals lose money in Options trading, There are various reasons behind this. Find out the reasons for losses and the steps by which you can be a profitable options trader here.
Options trading offers many options to traders, investors as well as hedgers. There are some common mistakes that option traders commit. Five of the most common mistakes are, taking too much leverage, not having a pre-defined stop loss and target, acting on tips on social media, adhering to buying options, and taking unhedged trades.
Stop-loss orders are used to limit the losses in case your view goes grown. An SL-M or Stop Loss Market order ensures your position is squared off at the market price if the trigger price is reached. Whereas in an SL Limit order, a separate trigger price has to be added, which when reached will forward the limit price to the exchange.
Intraday trading on Zerodha can be executed with ease by choosing the type of trades you want to engage in. These could be NIFTY, BANK NIFTY, or future options of companies. Once you choose the respective lot, then choose the type of orders and then buy the shares. Trade them when you see a profit or wait till a specific point till you recover your investment.
Putting Stop losses for any position is an essential step to ensure that no major losses occur if the view on the underlying goes wrong. You should always place a Stop Loss when trading Intraday or positional. You can use a stop loss in Zerodha by following some easy steps.
Options Trading is a risky business and options traders have to look at various parameters before taking a trade. Choosing a time frame is one of the factors in options traders. Both option Buyer and Sellers use different time frames to trade. Let's see which time frame is most useful for options buying as well as selling.
If you're looking for a straightforward and comprehensive take on options trading, then Sensibull should do the job perfectly. However, if you're and expert and want more complex trading tools, then Opstra is the one to choose.
Trigger price is the price entered by a trader during stop-loss limit and stop-loss market orders. Let's understand this in detail. In Zerodha following this mechanism is really simple.
Zerodha offers a wide range of services and tools for traders and investors to make their trading experience as seamless as possible. For those wanting to know, What is Zerodha cover order? It's then a unique way to minimize the risk in intraday trading and maximize the profit that one might avail.