is it possible to buy call/put of a f&o banned stocks for intraday
F&O stocks are banned when the open interest exceeds 95% of the market wide position limit. The reason for the ban is to curb any further increase in open interest.
When you take an intraday position, it’s all good. Because this will be squared off on the same day and will not add to the open positions. But there are instances where it ends up becoming a new carry forward position:
- If there is illiquidity in the option and you were unable to square it off on the same day before the market closes, it becomes a new carry position.
- If you use the position conversion option on an intraday position and convert it to a normal position, there is no way for the system to monitor and stop this. The position will get converted and it becomes a new carry position.
In both the instances, the open interest increases and the broker is penalized by the exchange. The broker, in turn, has to pass on this charge to the client. To avoid such scenarios, even intraday trading isn’t allowed in banned scrips.
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Why can’t broker pass the charges to the client, I read its 1% of the amount and max 1lac. I would rather prefer to do my trades and square off and in worst case pay the fine.
1% of total with minimum of rs 5000 per lot per client, also few clients would say broker should have blocked it and refuse to pay penalty. And if this repeats member will be referred to disciplinary committee. Lot of other operational risks for broker which can effect all other clients. Liquidity issues So, at zerodha we kept the policy of not allowing to trade in fno of ban scrips for intraday. If one want to speculate may be they can use intraday product types and trade in equities.