You would have had an experience of being blocked from buying or selling few options and futures contracts and be wondering why. Here is the answer. Illiquid Options and futures are blocked as per Tradeplus’s internal Risk management policy in order to protect traders from been stuck with a position in the absence of counter parties to cover the same. For example if we allow to buy an illiquid contract, a client would be able to create a position in it by buying or selling the contract. A risk arises when the client is unable to square off the position due to non availability of counter party which is highly common in illiquid contracts. As a result of this, the client would necessarily be required to bring in additional margins failure of which would attract penalties These penalties will be on the broker for not taking due diligence to prevent trading in illiquid contracts. To avoid these we block illiquid contracts.
Basis of ascertaining illiquid contracts
Level 1 check: Expiry based
Options and Future contracts that are Fully Blocked from trading. | Index Options – 3rd month onwards Index Weekly Options – 4th weekly contract onwards Stock Options – 2nd month onwards Stock Futures - 3rd month Commodity Futures – 3rd month onwards Commodity Options – 2nd month onwards Currency Options – 2nd month onwards Currency Weekly Options – 3rd weekly contract onwards |
Level 2 check : Volume based :
If any option or Future contracts in any segment and any expiry record a traded volume of Zero on T day, then such contracts would be blocked for trading on T+1 day.
Attached is the list of contracts blocked.
