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Home Stock Market Why do Stocks enter into the F&O Ban, Margin Charges, and penalty

Why do Stocks enter into the F&O Ban, Margin Charges, and penalty

What will happen to my stocks who entered into an F&O ban? How to calculate the Margin and the Penalty if any?

Why do stocks enter into the F&O ban category?

When any stock that is traded in the F&O category exceeds the prescribed limit of 95% of the Market-wide positions limits (MWPL) considering the cumulative futures and options they entered into the F&O ban period. Exchanges set these threshold limits based on the various parameters.

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How does the ban period affect the traders?

When any stock enters into the F&O ban period, traders are no longer in a position to make any fresh positions in futures and options contracts during such period.

This criterion of calculating MWPL is done at the end of the trading session. Stocks entry/ exit into/from F&O ban from the next trading session.  

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I am holding futures and options trade and stock went into F&O ban, can I sell my positions?

Yes, only fresh positions are prohibited, the trader can sell their existing position during the ban period.

Normal trading is allowed in the cash/equity segment.

How long does stock stays in the ban period?

There is no prescribed time slot for any stock to be in the ban period. The only condition for any stock to get out of the F&O ban is to get the limits of its Market-wide position (MWPL) below 80%.

What will happen if I will not execute my options till the last week of the month?

If the trader has not executed their call options the exchange will charge physical delivery margins against such script as a % of applicable margin considering the Value at Risk (to hedge the losses of uncertain market/risk factors, Extreme Loss Margin (whereby certain margin will get blocked for the factors not covered undervalue at risk), and Adhoc Margins (specific to script considering the nature of the stock).

Such margins will be levied from the expiry minus 4 days for long ITM options:

DayMargin
Expiry minus 4 days10% of Value at risk plus Extreme loss Margin plus Adhoc margins
Expiry minus 3 days25% of Value at risk plus Extreme loss Margin plus Adhoc margins
Expiry minus 2 days45% of Value at risk plus Extreme loss Margin plus Adhoc margins
Expiry minus 1 day70% of Value at risk plus Extreme loss Margin plus Adhoc margins

If you are trading on Zerodha, they charge 50% of the contract value on Wednesday and Thursday of the expiry week

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What will happen if I am short of the Margin amount?

A certain amount of penalty will be levied in case the trader is short of Margin for Futures and options positions or equity trades.

SituationPenalty % of the shortfall amount
Where the short collection is less than Rs. 1 lakh and the applicable margin is also below 10%0.5%
Where the short collection is equal to Rs. 1 lakh or the applicable margin is equal to 10%1.0%
c

Commonly used F&O Margin Calculators: Zerodha NSE  

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