Each security will have a total allowable contracts limit, also known as the market wide position limit. If a stock reaches or crosses 95 percent of this limit, it will go into ban period in the F&O (futures and options.)
This is the security under the ban time.
If a stock is in ban period,
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No fresh contract is allowed on that security
When the open interest on the security goes down to 80 per cent of the wide position limit by expiry or sale and end of the contract, new contracts are allowed
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There are penalties on new contracts during the ban period to ensure this.
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Intra-day Trades are allowed as they will not affect the open interest position
Trading with a Security Under Ban
In this period, the concept of ‘rollover’ can become very important.
A rollover in this time means that the trader will exit the current contract and have an identical contract in the next period. If the current contract is almost at expiry and the security is under ban then the trader cannot enter into any fresh contracts on the security.
However, a rollover ensures that there is no increase in the open interest and thus no penalty is incurred.
For a rollover of this sort, a trader will have to manually apply for a rollover, as automated contracts would be difficult during the ban period.
Otherwise, trading on this security will cease until the ban period is over. This is usually not a long period.