InfoTech ........ Your post is mostly copy/paste from Interactive Brokers so called "Knowledge Base", and perhaps other brokers as well. IB's Handling of Market Orders RE: "The internet is filled with verifiable examples of horrific fills resulting from the the poor use of market orders." I prefer to debate with someone who has real market experience. Post your own experiences, not what you read on the internet. If you are going to reference info from other websites post a link and let me read it - I will not rely on your interpretation of such material.
Here’s a verifiable, recent example. The SPX Dec’17 500 Put traded for $83.40 on the morning of August 24th due to a spike caused by market orders. When you check this data against your “Time and Sales” source, you will see that the price of the option rose from $7 to $83.40, and back down to $5.70, all within the same minute. Someone got hurt. Someone else got very, very lucky. The article describing this trade appears here: http://blog.slcg.com/2015/08/the-recent-market-turmoil-spells.html
You are now off topic .......... IB's policy or its algorithm for auto-liquidation and the market turmoil on August 24th has nothing to do with client entered Market Orders vs Limit Orders. It looks as though the IB client that story is about had an existing short SPX Dec17 500 position open going into August 24, 2015. The market crashes, volatility spikes and IB auto-liquidates his position. He now has contacted the "Securities Litigation & Consulting Group" for help and his story is vaguely featured on their site. His problem was he didn't have enough margin to cover his short position during volatile times - he got caught with his pants down. ===================== I will reiterate my position to get back on topic. From post #5. "Market orders are perfectly fine, and you will not get a "lousy fill". And during volatile times Market Orders should be used exclusively, the OP will figure that out after a few trades."
Yes ........ Short options are risky. If you don't have the margin to cover your position then you are at the mercy of how your broker is going to handle it. It is what it is.