Slippage
The gap between the price you intended to trade at and the price you actually got — a silent cost that compounds across every trade.
Definition
Slippage is the difference between the expected execution price of an order and the actual fill price received. When you look at the ask price and place a market buy, you might expect to pay exactly that ask — but by the time your order reaches the exchange, the ask may have moved, or your order size may sweep several price levels in the order book, resulting in a worse average price. Slippage can work in your favour (positive slippage) in fast-moving markets where the price dips briefly, but for practical purposes it almost always means you paid more to buy or received less to sell than expected.
Why it matters
Slippage is one of the most significant and least discussed trading costs in Indian F&O markets. Unlike brokerage (flat fee) or STT (fixed percentage), slippage is variable and invisible — it does not appear on your contract note as a line item. Yet for active traders placing 10–20 option trades per day, accumulated slippage can easily exceed total brokerage costs.
The main drivers of slippage in NSE options are: the width of the bid-ask spread, the depth of the order book relative to your order size, market volatility at the moment of execution, and latency between your click and the exchange receiving the order. On a Bank Nifty weekly expiry day, implied volatility can spike sharply in the last hour, causing market makers to rapidly widen quotes — slippage on even moderate-sized orders can jump from ₹0.25 to ₹2–₹5 per unit without any change in position size.
Slippage is also asymmetric for option buyers versus sellers. Option buyers generally face the full ask-side slippage when entering (paying above fair value) and bid-side slippage when exiting (receiving below fair value). Option writers (sellers) face the reverse. This two-sided cost is why strategies requiring frequent entry/exit — such as intraday scalping on options — are harder to profit from than strategies with fewer, better-timed trades.
Formula
Slippage per unit = Actual fill price − Expected price (for buys; reversed for sells). Total slippage cost = Slippage per unit × Lot size × Number of lots. For example, if you expected to fill at ₹100 but filled at ₹101.50 across 3 Nifty lots: ₹1.50 × 75 × 3 = ₹337.50 of slippage on a single entry.
Example
Suppose you see a Nifty 24,200 CE quoting ₹95 ask on your screen and you place a market buy for 10 lots. Due to a 150ms round-trip delay and moderate book depth, your fills come back as: 4 lots at ₹95, 3 lots at ₹95.50, and 3 lots at ₹96 — an average fill of ₹95.35. Against the ₹95 ask you saw, you paid ₹0.35 extra per unit. Across 10 lots that is ₹0.35 × 75 × 10 = ₹262.50 in slippage. If you face similar slippage on both entry and exit, your round-trip slippage is ₹525 — invisible on the contract note but very real on your P&L. Using a limit order at ₹95.25 (between bid and ask) would likely have filled the full 10 lots at or below that price in a liquid Nifty contract, saving most of that cost.
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