---THREAD ON F&O BAN---

📛 What’s F&O Ban?
Stock goes into ban when combined Open Interest (OI) of both Future & Options contracts across series & across exchanges exceeds 95% of Market Wide Position Limit (MWPL)

Reason for stock going in ban is to curb EXCESSIVE SPECULATION

📛 What happens when stock goes into ‘FNO ban’?
-One CANNOT take Fresh positions
-But CAN square off existing position
📛 Can you trade?

Yes, you can take ‘INTRA-DAY’ position ONLY if your broker allows

But If intraday position ‘NOT CLOSED ‘

Then exchange levies PENALTY of 1% of value of increased position subject to minimum penalty of 5k & max of 1 lakh
📛 When stock is in ban can you reverse an existing position in a stock that is in FNO ban?

'YES'

Example

-If you are long on 2000 Call strike of RIL
-Can reverse with opposite position by selling 2000 Call strike
📛 When does the stock come out of ban?

-When OI falls below 80% of MWPL

Note: Exchange releases MWPL data for all F&O stocks monthly
📛 WHAT IS MWPL?

Limit used for calculating max no of positions allowed in F&O market

It is lower of:-
-30x avg no of shares traded daily in cash segment in preceding month

-20% of non-promoter holding (free float)
📛 MWPL Explained with an Example
If equity base is 100

Non promoter holding is 60% (60 shares)

No of shares considered for MWPL will be 20% of 60 which is 12 shares

---THREAD CLOSE---

More from Stockslearnings

Should you add more in Equity or redeem right now?

A thread 🧵to guide retail on why & what should they do at these historic market highs.

Do ‘re-tweet’ and help us educate more retail investors (1/n)

#investing #StockMarket

Some investors feel that markets are trading at a PE of 27 vs 10 years historical average of 20 and a market-cap to GDP of 105 vs historical average of 79 and hence markets look expensive (2/n)


But, in such crazy liquidity driven markets, prices can move much ahead of the fundamentals & suddenly we start hearing commentaries of how the market is pricing in the earnings of FY 22 & 23 to justify the rally

If you r new to fundamentals, 👇 can help


Results for Q4 have come out very well but that is also because of the lower base effect of the last year.

Over the last many years, markets have corrected 10-15% each calendar year. Can it happen this year as well? Can very much and that can be a great entry point. Why? (4/n)


There are a lot of over hangs in the near term,
-Crude going up
-$ index moving up
-Inflation moving up
-COVID uncertainties
All of the above are –ve for markets & liquidity on the other side driving markets up, its impossible to judge the near term movement of the markets (5/n)

You May Also Like