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Why are risk management checks in place for trading options on CubePlus? Can you provide an example of how these risk management checks work in practice?
Risk management checks on CubePlus are a regulatory requirement imposed by exchanges. The primary goal is to prevent trades in options happening at prices significantly different from their theoretical values.
Let's say a stock is trading at ₹100, and a Call option with a 110 Strike is priced at ₹10. If a buy trade is attempted at ₹50, it would be considered significantly away from the theoretical price.
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