The main reason for freak trades is low liquidity, the more OTM we go, the higher chances of freak trades. As per my experience and knowledge, the best way to avoid freak trades is, by not placing orders at market price, have to use Limit orders instead. And avoid low liquidity strike prices for trading.
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Avoid placing OTM options with high volatility with market order. It usually happens when the expiry is far for that particular option strike price and when you place a market order the system executes the order on the time but due to high volatility the price gets executed at the highest and then you end up making huge loss. My advise is that avoid placing orders in options when the expiry is too far and also when it is out of the money.
Hi Preetesh, as others have already pointed it out, when it comes to trading options where liquidity is low, one must use limit order over market order to avoid freak trades.
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