Why is intraday trading not allowed for contracts if the underlying security is under an F&O ban?
Why is intraday trading not allowed for contracts if the underlying security is under a pan? Find a clear answer in this FAQ by 021 Trade.
F&O Ban Period โ Explained
A security is placed under the Futures & Options (F&O) ban when its open interest (OI) exceeds 95% of the Market Wide Position Limit (MWPL).
During this period:
- Opening new F&O positions is not allowed
- Traders can only exit their existing positions
This restriction is imposed to control excessive speculation and maintain market stability.
Due to lower liquidity during the ban period, exits may involve high slippage, meaning the execution price could differ significantly from the last traded price, potentially leading to losses.
The ban is lifted once the open interest falls below 80% of MWPL, and normal F&O trading resumes.
Note: Trading in the cash segment remains unaffected, ensuring liquidity and proper price discovery.
