The National Stock Exchange has put eight securities under the futures and options (F&O) ban for trading. According to NSE, these stocks are banned under this segment because they have passed over the 95% of the MWPL (market-wide position limit).
Interested in knowing more about this topic and what F&O ban is?
Vodafone Idea – a New Entry to the F&O Ban List
Telecom operator Vodafone Idea is a new entry to this list. NSE made this decision on 14th October 2021. Meanwhile, securities/stock of the following companies continues to be on the list:
- Indian Railway Catering and Tourism Corporation (IRCTC)
- Punjab National Bank (PNB)
- Bank of Baroda (BOB)
- National Aluminium Company Limited (Nalco)
- Steel Authority of India (SAIL)
- Sun TV
- Indiabulls Housing Finance
As per NSE, the derivative contracts in these securities have crossed 95% of MWPL and hence fall under this ban by the stock exchange.
NSE also addressed all members by saying that they can trade in the derivative contracts of these securities. However, members and clients must do so to decrease their positions via offsetting positions. Further, any increase in open positions will eventually lead to penalties and disciplinary measures.
In addition, zero fresh positions will be allowed for any F&O contracts in a particular stock. This will stay as long as the security/stock remains under the ban period.
What is the F&O Ban?
The idea behind the stocks ban in F&O is to stop any uncontrolled speculative activity. As mentioned earlier, stock exchanges impose this ban when security crosses a certain percentage of MWPL.
Further, MWPL is calculated by considering the lower of below-mentioned figures:
- 30x the average number of shares trading on a daily basis during the previous month in the cash segment
- 20% of the number of shares held by free-float holding or non-promoters.
What happens if a trader violates this ban?
Upon ban violation by a trader, a penalty of 1% of the increased position value is imposed on a trader. This amount is subject to a minimum of Rs. 5,000 and a maximum of Rs. 1 lakh.
Moreover, this ban remains intact until total open interest of a stock reaches 80% or less of MWPL. Once reached, the stock resumes trading normally.
Stocks under the F&O ban can cause massive losses to traders if they stay unaware. This is because when a stock is listed under the said ban, they will need to square off their transactions at an unsettling price. However, being alert can help traders in avoiding such situations.
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Frequently Asked Questions
- How to know if a ban stock is about to leave the list?
You can look at the possible exits to find out the probable F&O ban stocks that may leave the list soon.
- Can I trade stocks on F&O ban?
The ban does not allow you to open a new position with these stocks. However, you can trade stocks by squaring off. Also, consider trading in the cash segment.
- What is MWPL?
MWPL is the maximum contracts number that can be opened at a particular time.