Zerodha Market order ITM

Market orders blocked for deep ITM index options

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Zerodha Kite blocks market orders for deep ITM (in-the-money) index options to protect retail clients from large slippage. For these contracts, only limit orders are accepted.

Why blocked

Deep ITM index options often have:

  • Wide bid-ask spreads (10-20% or more).
  • Thin order book depth at quoted prices.
  • Mostly intrinsic value (minimal time value).

A market order on a deep ITM option could execute multiple ticks away from LTP, causing substantial loss. Brokers block market orders to prevent this.

What “deep ITM” means

For an option, “deep ITM” is when:

  • Underlying is far above the strike (for calls).
  • Underlying is far below the strike (for puts).
  • Premium is mostly intrinsic value.

For a Nifty at 22,000:

  • 21,000 CE (1,000 points ITM) = deep ITM.
  • 20,500 CE = even deeper ITM.

Workaround: limit orders

Place a limit order at:

  • The current best bid (for sells).
  • The current best ask (for buys).
  • Within a few ticks of LTP for a quick fill.

Limit orders execute at your specified price (or better); no slippage risk.

See also

External references

References

  1. Zerodha Support, Market order restrictions on illiquid F&O, support.zerodha.com.
  2. SEBI, Risk management framework for retail F&O, sebi.gov.in.

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