On October 1, 2024, the National Stock Exchange (NSE) placed four stocks under the Futures and Options (F&O) trading ban. The stocks that made it to the ban list are Balrampur Chini Mills, Bandhan Bank, Hindustan Copper, and RBL Bank. These stocks exceeded 95% of their Market-Wide Position Limit (MWPL).
The NSE imposes an F&O ban when a stock exceeds 95% of the Market-Wide Position Limit (MWPL). MWPL is a threshold set by the exchange to manage risk. When trading volume in derivative contracts for a particular stock crosses this limit, it raises concerns about increased speculation and market instability.
Stocks Affected
The four stocks banned from F&O trading on October 1 are:
- Balrampur Chini Mills
- Bandhan Bank
- Hindustan Copper
- RBL Bank
While these stocks are in the F&O ban list, it’s important to note that they can still be traded in the cash market. This means that investors can buy and sell the actual stocks, but not their futures and options.
When a stock is under the F&O ban, investors who already have open positions in the stock’s derivative contracts are still allowed to close their positions. However, they cannot open new positions in those contracts until the stock is removed from the ban list. The NSE reviews the F&O ban list daily, so it’s possible for a stock to be removed from the list once the trading volume falls below the MWPL.
For investors holding positions in Balrampur Chini Mills, Bandhan Bank, Hindustan Copper, and RBL Bank, this ban means that they need to be cautious about their derivative positions. They may want to consider unwinding or closing their positions during this period. Since new derivative contracts cannot be initiated during the ban, it may affect short-term trading strategies for those looking to profit from movements in these stocks.
Investors are still able to buy and sell these stocks in the cash market. This means that while F&O positions are restricted, buying and selling the actual shares is still allowed.
The F&O ban is not permanent. Once the trading volume of the derivatives falls below the 95% MWPL, the ban is lifted, and normal F&O trading can resume. The NSE keeps a close eye on these limits to ensure that there is no excessive speculation in the market. The goal is to keep the market stable and prevent any wild price swings that can hurt both investors and the economy.
The inclusion of Balrampur Chini Mills, Bandhan Bank, Hindustan Copper, and RBL Bank in the F&O ban list serves as a reminder of the risks associated with derivative trading. Investors who are actively trading in these stocks should monitor their positions and be aware of the ban’s effects. While trading in the derivatives market is restricted, these stocks are still available for regular cash market trading, offering investors an alternative way to engage with the stocks. The NSE will continue updating the ban list as needed, keeping traders informed of market conditions.
