Futures & Options: Why stocks go ban very often

A stock goes ban in F&O when its subsidiary contracts cross 95% of the market wide position limit (MWPL). As such, at the point when the joined open enthusiasm for all the choice and prospects contracts for all the months taken together crosses 95% of MWPL, stock is ban in F&O. 

When ban, trade in the subsidiary contracts is permitted just to diminishing positions through off­setting positions till the typical exchanging the scrip is continued. As it were, no new/ new contracts are allowed, yet intra­day trades are permitted, as they don't change the open hobby. Any increment in open positions draws in punishment of Rs. 5,000 every agreement. The stock goes out of the ban i.e. ordinary exchanging F&O contracts of the stock continues when the total open enthusiasm over the trades boils down to 80% or beneath of the market wide position limit. 

On 6th January 2014, Apollo Tires was ban in F&O trade. Its market wide position limit for January 2014 was 5.695 crore (according to NSE discharge).  On 3rd January 2014, open enthusiasm for Apollo Tires remained at 5.341 crore total of Jan Futures, Feb Futures, March Futures, Jan Option, Feb Choice and March Option) which was 94% of the MWPL.

This conveys us to the following inquiry ­ what is Market Wide Position Limit (MWPL)? Market wide position limits, pertinent just for stocks (all alternative and fates position) and not on list subsidiaries, is communicated as far as number of shares. It is the lower of: 1. 30 times normal number of shares traded day by day, amid the past schedule month, in the money portion of the trade, or 2. 20% of the quantity of shares held by non­promoters i.e. 20% of the free buoy, as far as number of shares of an organization. 

Stock Exchanges discharge the MWPL for each of the stocks traded in the subsidiaries portion on a month to month Basis

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