Q & A with Traderji

[Traderji]

Traderji,
Often we see this kind of message while trading " Stock xyz breaches limit of 95%,you can not take any fresh positions in F&O in this stocks."
My question is how do they calculate that a certain stocks breaches it's limit.I mean, is any formula there?If yes,please tell and kindly explain.
Regards,
Wantamentor

This figure is dynamic and is calculated in real time during trading hours.

Exposure Limits

The exposure for members should not exceed at any time, including during trading hours, the following limits:

i. For Index options and Index futures contracts:
33.33 times the liquid networth. This translates into a margin of 3% of the notional value of a contract. For option, it is charged only on short positions.

ii. For option contracts and Futures Contract on individual Securities:
The Exposure limits which is higher of 5% or 1.5 standard deviation of the notional value of gross open position in futures on individual securities and gross short open positions in options on individual securities in a particular underlying shall be collected /adjusted from the liquid networth of a member on a real time basis. The standard deviation of daily logarithmic returns of prices in the underlying stock in the cash market in the last six months shall be computed on a rolling and monthly basis at the end of each month. The applicable exposure limits are available to members on NSE's website.

For this purpose notional value means :
- For a futures contract – the contract value at last traded price/ closing price.
- For an options contract – the value of an equivalent number of shares as conveyed by the options contract, in the underlying market, based on the last available closing price.

Exposure limits in case of calendar spread positions in futures contract are treated as open position of one third of the value of the far month futures contract. However, the spread positions are treated as a naked position in far month contract three trading days prior to expiry of the near month contract.

You can view the Market-wide Position Limit at http://www.nseindia.com/content/nsccl/mpl.csv

For more detailed info please read http://www.nseindia.com/content/nsccl/nsccl_foposlimits.htm

 

[beginner_av]

dear traderji,

thx for this lovely forum. is there any way to ensure that wild openings against you will not go way past your stop loss?
i know nobody can guarantee that, and it can happen. but then what do you do to deal with it?
1.when the market becomes extremely choppy, you stand aside?
2. You keep your 3llv stop and take it as an occupational hazard that occurs only in statistically insignificant times
3. if its an fno scrip/index, buy a put?

thx

 

[Traderji]

dear traderji,

thx for this lovely forum. is there any way to ensure that wild openings against you will not go way past your stop loss?
i know nobody can guarantee that, and it can happen. but then what do you do to deal with it?
1.when the market becomes extremely choppy, you stand aside?
2. You keep your 3llv stop and take it as an occupational hazard that occurs only in statistically insignificant times
3. if its an fno scrip/index, buy a put?

thx

Interesting question! Unfortunately like you said, the risk of losing money is a part of trading process. You just have to prepared for it and take it in your stride.

I generally try and aviod trading or holding open positions on highly volatitile days when company results are declared or budget day, etc. This has saved me a number of times.

 

[beginner_av]

thx traderji for your reply.

one more q. when u enter a trade after identifying it, do u do it at the open of next day or wait for the opening range to complete for 15 mins or look at hourly chart for suitable entry? and once if u have entered, and the trade immediately starts going against you, do u put the intraday low as your stop or still wait for 3llv to hit?

thx

 

[Traderji]

thx traderji for your reply.

one more q. when u enter a trade after identifying it, do u do it at the open of next day or wait for the opening range to complete for 15 mins or look at hourly chart for suitable entry? and once if u have entered, and the trade immediately starts going against you, do u put the intraday low as your stop or still wait for 3llv to hit?

thx

I generally wait for 30 minutes before entering the trade. I use the 3llv as a stoploss for the trade.

 

[reachjesal]

Am still not able to understand the funda behind marketwide limit reach of a scrip , i tried studying what was given in the NSE website .. but fail to understand so ..traderji if u could elucidate on that .. and one more thing when there's a ban it usually happens for all the months of that particular scrip .. take the case of sobha developers its on ban and jan feb march all months have been banned ...

thank in advance

 

[Traderji]

Am still not able to understand the funda behind marketwide limit reach of a scrip , i tried studying what was given in the NSE website .. but fail to understand so ..traderji if u could elucidate on that .. and one more thing when there's a ban it usually happens for all the months of that particular scrip .. take the case of sobha developers its on ban and jan feb march all months have been banned ...

thank in advance

This is primarily done to prevent build up of excessive open positions in the F & O market that would be greater than the market cap of that particular underlying stock.

 

[oilman5]

traderji,
i request u to comment on 'journey of a trader'


oilman5

 

[oilman5]

I generally wait for 30 minutes before entering the trade. I use the 3llv as a stoploss for the trade.

for safety...
or confirmation by price

oilman5

 

[Traderji]

for safety...
or confirmation by price

oilman5

Not for safety, but for confirmation of price!