Trading
Trading
This domain tests how F&O orders are placed, matched and confirmed, and how contract specifications affect execution. Questions often turn on order types, validity, price bands, expiry and member roles.
Core rules
- F&O trading is screen-based and anonymous, with price-time priority. A limit order sets a maximum buy price or minimum sell price; a market order seeks immediate execution but may fill at worse prices in thin contracts.
- Stop-loss orders become active only when a trigger price is touched; execution is not guaranteed at the trigger. Stop-loss market orders can slip sharply.
- Monthly contracts normally expire on the last Thursday of the expiry month; if that is a holiday, the previous trading day. Index options can also have weekly expiries. Trading hours for F&O are 9:15 a.m. to 3:30 p.m. on trading days.
- Exchanges impose price bands and quantity freezes. A dealer must know the applicable band before sending a large order, and must not assume an order will fill because it is within the band.
- A trading member executes; a clearing member clears. A dealer trading proprietary must still follow margin, position-limit and order-record rules.
Worked example
A dealer buys 10 BankNifty futures lots at 48,000; assume lot size 15. Notional = 48,000 × 15 × 10 = ₹72,00,000. A stop-loss sell is placed at 47,700. If triggered, the loss is (48,000 − 47,700) × 15 × 10 = ₹45,000 before costs. If the order slips and fills at 47,650, the loss rises to ₹52,500, showing why stop-loss execution is not guaranteed.
Traps
- Confusing a limit order with a stop-loss order.
- Assuming a stop-loss guarantees the trigger price.
- Modifying an order and expecting to keep queue priority.
- Ignoring expiry-day timing and contract rollover.
- Treating exchange membership as SEBI registration.