Investors in the stock market should be aware of a list of 12 stocks that have been placed under a special trading ban today, Thursday, May 16th, 2024. This ban applies specifically to the Futures & Options (F&O) segment of the National Stock Exchange (NSE).
The companies on this F&O ban list include some well-known names like Biocon, LIC Housing Finance, Piramal Enterprises, and Zee Entertainment Enterprises (ZEEL). The other companies affected are:
- Balrampur Chini Mills
- Birlasoft
- GMR Airports Infrastructure
- Granules India
- Hindustan Copper
- Vodafone Idea
- India Cements
- Steel Authority of India (SAIL)
What is the F&O Ban?
The F&O segment allows traders to buy and sell contracts based on the future price movement of a particular stock. This can be a risky but potentially rewarding strategy. The F&O ban is a temporary measure taken by the exchange to control excessive volatility in a stock’s F&O contracts.
Why are These Stocks on the Ban List?
The NSE puts a stock on the F&O ban list when the total value of F&O contracts for that stock reaches a certain threshold. This threshold is known as the Market-Wide Position Limit (MWPL). When a stock’s F&O activity crosses 95% of the MWPL, the exchange intervenes to cool things down by placing a ban.
What Does This Mean for Investors?
The F&O ban only applies to trading in futures and options contracts for the listed stocks. Investors can still buy and sell shares of these companies in the regular “cash market” segment of the NSE. However, the ban can be a sign of increased volatility in these stocks, which could be risky for investors.
Here’s what you should do:
- Be cautious: If you were considering buying F&O contracts for any of these stocks, it’s best to wait until the ban is lifted. The ban suggests high activity and potential for sharp price movements, which can be risky for options trading.
- Consider alternatives: You can still invest in these companies by buying shares in the cash market. However, be sure to do your own research and understand the company’s fundamentals before making any investment decisions.
- Stay informed: The NSE updates the F&O ban list daily. You can check the exchange’s website for the latest information.
The Bottom Line
The F&O ban is a temporary measure to manage risk in the derivatives market. While it doesn’t prevent trading in the underlying stocks, it’s a signal for investors to be cautious and do their due diligence before investing in any of these companies.