Why is the option order getting rejected saying place around the theoretical price?

When you see this message, it means that your option order is being rejected because it is too far from the theoretical price of the option contract. The theoretical price is calculated based on the option’s underlying stock prices, strike price, time to expiration and implied volatility. When your order is too far, it is difficult or impossible to execute the trade. This message is designed to help you place a better priced order that has the higher chances of being filled.

Click here for more info.

For Ex: Assume a stock is trading at 95 and the Call option with a strike price of 100 is trading at 5. If a buy trade was made at 50 while the stock was still trading at 95, the trade would be off the theoretical price. Price discovery is disrupted by such wild trades, and traders suffer massive losses.

These trades can be placed:

1. Unintentionally: Traders may unintentionally place larger orders.
2. Intentionally: Some traders intentionally place large orders to manipulate price and create artificial losses. They can able to do this by doing trading into illiquid option contract where option price is much higher than its theoretical price.

       

On Tiqs platform, to protect customers from such scenario we only permitted to place orders within a range of the contract's theoretical price. Neither we allow market orders in illiquid index options and stock option contracts on Tiqs. Due to these reason mentioned, exchanges also have stopped supporting Stop Loss Market [SL-M] orders for option contracts. If this error is displayed, ensure that orders are not placed in the incorrect option contract and that orders are placed closer to the theoretical price.

Did you know that? An order can still be placed outside of Tiqs theoretical range by using the long-standing order type, also known as Good Till Triggered (GTT). When the GTT is triggered, however, the above theoretical range checks are applied, and the order is rejected if it falls outside the range.