When we talk about Future and Options contract, the term ‘Derivates’ comes automatically. A derivative is a contract between two or more parties. The value is based on an agreed-upon underlying asset. As the article will cover an important section regarding Future and Options, first of all, an introductory discussion about FnO (future and options) is significant here. The article will cover What Does FnO Ban Mean and Its Impact on Share Price.
When an underlying asset buys or sells at a pre-determined price and time, is called Future contract. It is a binding agreement. Investors are obligated to execute the contract on the date of the agreement.
In Option also, investors go through contracts in which they get the right to buy and sell financial instruments at a set price but on or before a certain date. They are not obligated to execute the contract on a specific date.
What Does FnO Ban Mean
I hope investors come across the term Future and Option Ban. In order o survive in the market and get a good amount of profit, you need to be acquainted with few terms, among them F&O Ban is important. This is also referred as “security ban in F&O”. Once any security is into the ban period, no fresh position can be taken, here fresh position refers to buy or sell. Traders can reduce their positions by liquidating or squaring up.
The reason for Market Ban
Think of a very naughty child whom we try to confine inside a small room or a small place so that he/she can not destroy household items. Same is the scenario of the FNO Ban. The banned securities are just like the naughty child.
Market ban happens when open interest or open derivates contracts cross 95% of the market-wide position limit, the security comes under the ban in the future and options category. Now, a question may arise that what the open interest is. Open interest is a combination of future and options contract all together for a month. If you are a regular trader in the market, you can notice, there are near about 12-13 F&O which are mostly banned by exchange board for crossing the market wide position limit. In the closing period you can find the banned list but at the time of opening, there will be no ban. If anyone still wants to take a fresh position, he will be penalized by the stock exchange.
So, Market-wide Position Limit violation is the main reason behind any security ban. Now, I will show you, how can you find the banned list. First, you need to search for ‘f&o ban today list’ in google, then open the NSE page link and you can download daily banned file from there. The page looks like this:
Every investor should maintain a track record regarding these banned securities F&O.
Lastly, in conclusion, based on our analysis, there are a few points I can mention here:
- The security ban is a consequence of Market-wide Position Limit violation.
- You can check the ban list on the NSE website.
- You must monitor the record in order to trade smoothly.
So, I hope you got your desired answer by following ‘What Does FnO Ban Mean’ through this article.
Categories: Stock Market Basics