The rule
Every F&O stock has a market-wide position limit (MWPL). When combined open interest across futures and options crosses 95% of MWPL, the stock enters the ban period.
During the ban
- No fresh positions can be created in that stock's futures and options.
- Existing positions can only be reduced; increasing them attracts penalties.
- Cash-market trading is unaffected.
Exit
The stock comes out of the ban once open interest falls below 80% of MWPL at the end of a day. Stocks in ban often see volatile moves as positions are forced to unwind.