The National Stock Exchange (NSE) has placed three stocks BSE Ltd, Hindustan Copper Ltd, and Manappuram Finance Ltd under the Futures and Options (F&O) ban on March 11. This decision was taken because these stocks exceeded 95% of the market-wide position limit (MWPL).
The F&O ban happens when traders take too many positions in a stock’s derivative contracts. When a stock’s total open interest crosses 95% of its MWPL, the exchange imposes a ban to control speculation and market risk. This helps to prevent extreme price fluctuations and maintains market stability.
These stocks can still be bought and sold in the cash market (regular stock trading). However, no new F&O contracts can be created until the ban is lifted. Investors who already have F&O positions in these stocks can settle their existing contracts, but they cannot open new ones.
When a stock is under an F&O ban, its price in the cash market may show higher volatility as traders adjust their positions. Some investors might sell their holdings, while others might see this as a buying opportunity. Market experts suggest that traders should be cautious and keep an eye on NSE updates.
The F&O ban is a standard measure by the NSE to ensure fair trading and market discipline. Investors should follow market updates and make informed decisions while trading. Staying updated with NSE announcements will help traders navigate market changes effectively.