F & O Ban
Sometimes We Find That Some Stocks Come Under F & O Ban, If A Stock Comes Under Trading Ban, After That You Cannot Take Any New Positions In Futures And Options. However, If You Have Any Positions Already You Can Square Off Your Positions.
The Restrictions Are Only In F&O, There Are No Restrictions In Cash Market.
What Is F & O Ban ?
For Example, Let Us Assume There Is A Company.
The Total Worth, Of The Shares Of The Company, Is 100 Crores.
Out Of Which The Promotors Are Holding 50 Crores Worth Of Shares, Which Means Remaining 50 Crores Is Held By Other People.
The 50 Crores Is Called Free Float Market Capitalization
Free Float Market Capitalization
Free Float Market Capitalization = Total Market Capitalization – Promoter Holding.
From Free Float Market Capitalization We Have To Take 20% Which Is 10 Crores.
This 10 Crores Worth Of Shares Is Called Market Wide Position Limit.
Market-wide Position Limit
Market-Wide Position Limit = 20% Of Free Float Market Capitalization.
The Total Trade Value Of Futures And Options Should Not Cross 95% Of Market-Wide Position Limit.
On Any Day If It Crosses 95% Of Market-Wide Position Limit.
At the End Of The Day, The Exchanges Will Announce It Is Coming Under Trading Ban For The Next Trading Session.
Once It Crosses 95% They Will Not Stop It In Intraday, It May Go Up 100%, 105% Also, Only At The End Of The Day The Exchanges Decide That The Stock Will Come Under Trading Ban For The Next Trading Session.
The f & o Ban Will Continue Until The Market-Wide Position Limit Comes Below 80%.
