Investing F&O ban MWPL open interest position limit Zerodha

F&O ban period restrictions

From WebNotes, a public knowledge base. Last updated 21 June 2026. Reading time ~12 min.

Key facts

What is allowed	Only trades that reduce or maintain your net future-equivalent (delta) open interest in the banned stock
What is barred	Any trade that increases your net delta exposure, whether a fresh position or an add-on
Penalty for breach	1% of the increase in position value, minimum Rs 5,000 and maximum Rs 1,00,000 per day, plus 18% GST (NSE penalty schedule)
Ban entry trigger	Market-wide open interest crosses 95% of the market-wide position limit (MWPL)
Ban exit trigger	Market-wide open interest falls below 80% of the MWPL
Product type	MIS and other intraday-leverage product types are blocked on banned stocks at Zerodha; only NRML is allowed

A stock enters the F&O ban period when the market-wide open interest in its derivatives crosses 95% of the market-wide position limit (MWPL) set by the National Stock Exchange and BSE . During the ban, the exchange permits only one kind of trade in that stock: a trade that reduces or maintains your net future-equivalent open interest. Open a fresh position, or add to one, and you breach the rule and pay a daily penalty. This article sets out exactly what is allowed, what is barred, the penalty arithmetic, and how Zerodha enforces the restriction on Kite .

The ban is a position-limit control, not a price control. It exists to stop any single stock’s derivatives from absorbing so much open interest that the segment becomes concentrated and hard to settle. A stock can sit in the ban list for one day or several weeks, depending on how fast the aggregate open interest unwinds. The mechanics of how a scrip gets onto the list, and how it gets off, are covered in why scrips enter the F&O ban ; this article is about what you can and cannot do once a stock is already there.

Conflict-of-interest disclosure. This article is published by the WebNotes Editorial Team for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this article does not carry it and earns no referral commission.

The one rule: reduce or maintain, never increase

The ban framework changed shape after the exchanges moved to a delta-based, future-equivalent (FutEq) open-interest measure for MWPL monitoring, replacing the older contract-count method. Under the FutEq framework, the exchanges measure your exposure in delta terms: a futures lot counts as one unit of delta, an option lot counts at its option delta, so a deep out-of-the-money option contributes far less than a futures lot of the same size.

When a stock enters the ban, the exchange captures your delta exposure at the start of Day 1 and treats that as your base position. From that point, the only trades the exchange will accept are those that keep your net FutEq open interest at or below that base. You can close a long future, buy back a short call, trim a position, or restructure your legs, as long as the net delta does not climb. A trade that raises your net delta above the base, a fresh long, a new short, or an add-on, is a violation.

The shift to delta measurement gave traders one practical gain over the old contract-count regime. Earlier, a stock in the ban froze you into your exact contracts. Now, because the measure is net delta, the exchange allows you to enter a new position or roll into another contract as long as your account’s net FutEq open interest is lower than, or equal to, the captured base. You can readjust rather than being forced to square off, provided the readjustment does not add net exposure.

What you can do during a ban

The permitted set is everything that does not increase your net delta in the banned stock:

Square off an existing position fully. Closing a long future, a short future, a long option, or a short option in the banned stock reduces your delta and is always allowed.
Reduce a position partially. Trimming some lots while holding the rest is permitted, because the net delta falls.
Buy back a written option. Closing a short call or short put lowers exposure and carries no penalty.
Restructure within the base. Under the delta framework you may add a hedging leg or roll into a different contract if the net FutEq open interest stays at or below the captured base. A long future hedged by buying a put, for instance, lowers net delta and is allowed.

The test is always the same: after the trade, is your net future-equivalent open interest in this stock higher than it was at the start of the ban? If no, the trade is fine. If yes, it is a breach.

What you cannot do during a ban

Open a fresh position. No new long or short in futures or options that lifts net delta above the base.
Add to an existing position. Buying more lots of a future you already hold, or writing more options, raises net delta and breaches the rule.
Use MIS or any intraday-leverage product. Zerodha blocks the MIS product type for banned stocks (see the next section).
Increase delta through an option leg. Selling an additional naked option or buying more directional options that push net delta higher is a breach, even if it looks like a small premium trade.

The penalty for a breach

A violation is not a soft warning; it carries a defined monetary penalty levied by the exchange. If you increase your delta-based exposure during the ban, the penalty is 1% of the value of the increase in position, subject to a floor of Rs 5,000 and a ceiling of Rs 1,00,000 per day, plus 18% GST on the penalty amount (NSE penalty schedule for MWPL breaches).

Two features of this penalty make it severe in practice. First, it is recurring. Because the exchange does not reset your base position after a violation, the penalty continues to apply every day until you bring your net delta back to or below the base, or the stock leaves the ban list. A single mistaken fresh position can therefore generate the penalty on Day 1, Day 2, Day 3, and so on, each day attracting at least Rs 5,000 plus GST. Second, the penalty is on the value of the increase, so a large breach scales up to the Rs 1,00,000 daily cap quickly.

Aspect	Detail (NSE/BSE MWPL framework)
Ban entry trigger	Market-wide open interest crosses 95% of MWPL
Ban exit trigger	Market-wide open interest falls below 80% of MWPL
Allowed action	Reduce or maintain net future-equivalent (delta) open interest
Barred action	Any increase in net delta exposure
Penalty	1% of the increase in position value
Penalty floor and ceiling	Minimum Rs 5,000, maximum Rs 1,00,000 per day
GST on penalty	18%
Recurrence	Daily until exposure is cut back or the stock exits the ban

Because the base does not change after a breach, the penalty is not a one-off cost of entry; it is a meter that runs until you fix the position.

How Zerodha enforces the ban

Zerodha applies the restriction at the order level so that most breaches are stopped before they reach the exchange. On a stock that is in the F&O ban list:

MIS is blocked. Intraday-leverage product types are disabled for banned F&O stocks. You can place only NRML orders. This removes the intraday-margin route that would otherwise let a trader take a fresh leveraged position cheaply.
Fresh-position orders are rejected. Order placement that would open or increase a position in the banned stock is blocked at the Risk Management System (RMS) level, so the order does not go through to the exchange. Only orders that reduce or square off an existing holding pass.
Forced square-off on a breach. If a position nonetheless ends up increasing your delta exposure in a banned stock, Zerodha may close the position to bring the account back within the permitted base, because the recurring exchange penalty otherwise accrues to the client.

The banned-stock list and the live MWPL utilisation percentages are published on the Zerodha margin calculator , and on the NSE and BSE websites at the end of each trading day for the next day. Check that list before placing any order in a stock you suspect is near the limit, because the ban is declared for the whole of the next trading day once the 95% threshold is breached intraday.

Why the restriction exists

The MWPL ban is a settlement-safety and concentration control administered by SEBI through the exchanges. The MWPL itself caps the total open interest possible in a stock’s derivatives. Under the revised framework, the MWPL is the lower of 15% of the free-float shares or 65 times the average daily delivery value of the stock in the cash market, where the delivery value represents roughly three months of cash-market trading. The earlier rule set the cap at 20% of free-float shareholding, so the move to the lower of two measures tightened the ceiling for many stocks.

When aggregate open interest in a single stock approaches that ceiling, the segment in that stock becomes concentrated, and a disorderly unwind on expiry could strain settlement. The 95% ban-entry and 80% ban-exit thresholds give a buffer: the ban kicks in before the limit is hit, and lifts only once exposure has come down meaningfully, not the instant it dips below the limit. The asymmetry between 95% in and 80% out is deliberate, so a stock does not flicker in and out of the ban on small intraday moves.

Practical consequences for a trader

A stock entering the ban while you hold a position changes your options. You keep the right to exit, so you are never trapped into holding through expiry by the ban alone. What you lose is the ability to add, average down, or open a new directional bet in that stock until it leaves the list. If your strategy depended on scaling into the position, the ban forecloses it, and you must work with the position you already hold.

For option writers the risk is sharper near expiry. If a banned stock is one where you hold short options, you cannot roll forward by writing fresh options in the same name that would increase net delta. You can buy back and exit, but you cannot replace the short with a larger short. Plan exits in banned names before expiry week, because the physical-settlement obligation on in-the-money stock options runs in parallel with the ban and does not pause because the stock is banned.

External references

References

Zerodha Support, “Why do futures and option scrips enter the ban period?”, support.zerodha.com (as of 21 June 2026).
Zerodha Z-Connect, “Understanding the new delta-OI based MWPL framework”, zerodha.com (as of 21 June 2026): ban entry at 95% of MWPL, exit below 80%; penalty 1% of position increase, minimum Rs 5,000, maximum Rs 1,00,000 per day plus 18% GST; MWPL revised to the lower of 15% of free float or 65 times average daily delivery value.
NSE, market-wide position limit and combined open interest monitoring, nseindia.com.
SEBI, framework on position limits and market-wide position limit in equity derivatives, sebi.gov.in.

Frequently asked questions

What can I trade when a stock is in the F&O ban?

Only trades that reduce or keep flat your net future-equivalent open interest in that stock. You may close or trim an existing position. You cannot open a fresh position or add to one, because that increases delta exposure.

What is the penalty for taking a fresh position in a banned stock?

The exchange levies 1% of the increase in position value, with a floor of Rs 5,000 and a ceiling of Rs 1,00,000 per day, plus 18% GST. It recurs every day until you cut the exposure back or the stock leaves the ban list.

Can I do MIS intraday on a stock in the F&O ban?

No. Zerodha blocks MIS and other intraday-leverage product types on banned F&O stocks. You can place only NRML orders, and only to reduce or square off an existing position you already hold.

Can I square off my existing position during the ban?

Yes. Closing or reducing a position lowers your delta exposure, which is exactly what the ban permits. Square-off, partial exit, and buy-to-close on a short are all allowed without penalty.

Does the ban apply to index options like Nifty?

No. The ban applies to single-stock futures and options whose market-wide open interest breaches the MWPL. Index derivatives such as Nifty and Bank Nifty have no MWPL and never enter the ban list.

Can I roll over a position in a banned stock?

Yes, if the roll does not increase your net future-equivalent open interest. Under the delta-OI framework, exchanges allow a roll or a fresh leg as long as your account’s net delta in the stock does not rise above your base position.

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 21 June 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.