Balrampur Chini Mills, Steel Authority of India (SAIL), and Zee Entertainment Enterprises (ZEEL) should be aware that these stocks are under a Futures and Options (F&O) ban on the National Stock Exchange (NSE) today, June 10th, 2024.
The NSE imposes an F&O ban when a stock’s open interest in derivative contracts crosses a certain threshold, currently set at 95% of the market-wide position limit (MWPL). Open interest refers to the total number of outstanding derivative contracts that haven’t been squared off (closed by an opposite transaction).
A high open interest indicates a significant amount of speculation in the stock’s price movement. To prevent excessive volatility and potential manipulation, the NSE restricts further buying of these contracts through the F&O ban.
Investors can still trade these stocks in the cash market, where they buy or sell actual shares of the company. However, they cannot open new derivative positions or increase their existing ones. Existing positions can only be squared off by selling (if they bought futures or calls) or buying (if they sold futures or puts).
If you hold derivative contracts in these stocks, you can:
- Square off your positions by entering an opposite transaction to close them.
- Hold your existing positions, but be aware of potential increased volatility in the underlying stock price.
The F&O ban itself doesn’t necessarily impact the stock price directly. However, it can affect short-term volatility as speculation through derivatives is restricted. The underlying fundamentals of the company and overall market conditions will still play a major role in determining the stock price movement.
An F&O ban is a temporary measure to control excessive speculation. It doesn’t necessarily indicate any underlying problems with the companies themselves. Investors should monitor the situation and make informed decisions based on their investment goals and risk tolerance.
The NSE website provides daily updates on the F&O ban list https://www.niftytrader.in/ban-list. Investors can also consult with their financial advisors for personalized guidance.