A thread : understanding MWPL and the F&O ban list 🧵
Market Wide Position Limit (MWPL) is the maximum number of open positions in futures or options contracts of a stock at the end of the day.
Why is there a MWPL?
Sebi and exchanges have decided a certain limit of open positions in an individual stock ie minimum a 500 crore and a maximum of 95% mwpl.
Sebi and exchanges have decided a certain limit of open positions in an individual stock ie minimum a 500 crore and a maximum of 95% mwpl.
This is because it is a leverage position and if there is a big move in the stock’s price, the retail investors can be saved from big loss if they have an opposite position of the stock’s movement.
Suppose the equity base of a company is of 1000, and the promoters’ holding is 50% ie 500 shares.
Remaining will free float shares, be it with FII, DII, Institutions or retail investors ie 500 shares.
Now out of these 500 shares, 20% will be the MWPL ie 100 shares.
Remaining will free float shares, be it with FII, DII, Institutions or retail investors ie 500 shares.
Now out of these 500 shares, 20% will be the MWPL ie 100 shares.
If the open positions in FnO crosses above 95 shares at the end of the day, it will go into ban the next trading day and will remain in ban until the open positions come down below 80 shares.
Fresh positions cannot be made in the stocks in FnO ban, but the positions which are open before it went into ban will be open and the trader has the only option to exit from the trade as long as it is in ban.
If you create an overnight position in a banned share, you are liable to pay penalty.
If any trader wants to create new position in ban period, a penalty of 1% of the value of increased position or at least ₹5000 per lot per day has to be paid.
If any trader wants to create new position in ban period, a penalty of 1% of the value of increased position or at least ₹5000 per lot per day has to be paid.
If the stock is going in ban because of price going up, it might come at lower levels since those who made long trades have to close trade.
While if it goes in ban because of price coming down, no fresh short positions can be created so the price can go up from there.
While if it goes in ban because of price coming down, no fresh short positions can be created so the price can go up from there.
In order to check the MWPL status of a stock, NSE website updates at day end.
In live market, we can track with the brokers which also update the MWPL.
Overall if we need to check the live status of MWPL positions, opstra.definedge.com website is helpful.
In live market, we can track with the brokers which also update the MWPL.
Overall if we need to check the live status of MWPL positions, opstra.definedge.com website is helpful.
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