Execution range is a price range within the circuit limits (operating range), on both sides of a 'reference price' of the contract only within which orders will get executed.

The reference price will be computed as follows:


For a new contract - At market open, Theoretical price derived from the underlying price (using implied volatility in case of options contracts and rate of interest which shall be revised daily with the applicable MIBOR rate) or base price of the contract in case the underlying price is not available at the time of computation. The base price of the contracts on subsequent trading days - At market open, shall be the daily close price.

During Trading Hours – 1 minute simple average of trade prices, on a rolling basis, 1 minute simple average of trade prices, the reference price shall be revised throughout the day on a rolling basis at 1-minute intervals

On days when the contracts were not traded in the last half an hour or not traded at all during the day, the base price for the next day shall be the theoretical price

So the execution range on both sides of the reference price would be :



Segment
Reference Price
% of Reference Price
Minimum absolute Range (Rs.)
Futures
All5 %-
Options
Rs 0.05 - 50-20

> Rs 5040 %-
To understand this better, assume -

Bank Nifty spot is at 20400. Banknifty 20300 CE trading at 140 on expiry day and you have bought it at this price. Now you want to put a stop loss order to protect your loss. Let’s take the circuit limits of this option at 0.05 (Lower circuit limit) and 200 (Upper circuit limit). Any order placed between the circuit limits is a valid order and will be stamped by the exchange. The circuit limits for options is calculated based on its Delta value. This circuit limit is a dynamic price and. But there is a possibility of order cancellation in the scenario explained below: For Bank Nifty 20300 CE, if the reference price is 100, then the executable range is 60 to 140 (range is 40% for contracts > Rs. 50) . Assume you have 1 lot (25 qty) and you have placed a stop loss for this at 50. This is a valid order and will be open (as it is within the circuit limit)

Now another buyer has also placed a Buy Limit order for 1 lot at 50 and this exactly matches with your 1 lot stop-loss order in the market depth. This is also a valid order and will be open as it is within the circuit limits of the contract.

If Bank Nifty spot falls 60 points in 1 minute, Banknifty 20300 CE option price will fall to 80. When this happens, the reference point at the end of this minute will change. Say the reference point is now 100 and the execution range has changed to a new range of 60 to 140. Your stop loss of 50 is still outside the execution range but is still open. If Bank Nifty spot falls another 30 points within the next trading minute. Banknifty 20300 CE will further fall to 50. Here, your stop loss of 50 has reached but it is still out of the execution range as the new reference point is yet to be formed only at the end of this minute. It is only after the new reference point is formed that your order will fall within the execution range. Since your stop loss of 50 has now been reached and there is a matching Buy limit order at 50, and it is still outside the execution range as the new reference point is yet to be formed, this order will be cancelled in such a scenario.
When there is a significant move in an F&O contract, and if the execution range is not updated immediately by the exchange (as it is calculated based on the average of the trades in the contract), your order could get rejected.
Click here to see NSE's circular on this.