➡️ MWPL=Market Wide Position Limit
➡️ MWPL=Market Wide Position Limit
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➡️ Meaning:
It is used in the Derivatives Market (Futures & Options segment).
MWPL refers to the maximum number of open positions (contracts) allowed in a particular stock’s futures and options combined.
This limit is decided by SEBI and the stock exchange.
Normally, MWPL is 20% of the free-float market capitalization of that stock.
If the utilization of MWPL crosses 95%, the stock is put in the F&O ban list.
👉 In simple words:
MWPL = The maximum exposure limit allowed (for all market participants combined) in F&O contracts of a particular stock.
➡️ Free float shares are shares that are not linked to the promoter. FIIs, DIIs and the public have all come under public shares.
1. Total & Promoter Holding
1. Total & Promoter Holding
Total Shares (Equity Capital) = 10 crore shares
Promoter Holding = 6 crore shares
So, Public Free Float = 10 – 6 = 4 crore shares
2. MWPL Calculation Rule
2. MWPL Calculation Rule
👉 By SEBI rule:
MWPL = 20% of Free-Float (i.e. Non-promoter) Shares
So here,
Free-float = 4 crore shares
20% of 4 crore = 0.8 crore shares = 80 lakh shares
✅ Therefore, MWPL = 80 lakh shares (which is 8% of total equity capital)
3. Individual Client Position Limit
3. Individual Client Position Limit
SEBI ने 2 layers of restriction रखी हैं:
Individual Client Limit = Maximum 1% of Total Equity Shares OR 5% of MWPL (whichever is lower).
1% of Total Equity = 10 crore × 1% = 10 lakh shares
5% of MWPL = 80 lakh × 5% = 4 lakh shares
👉 Lower = 4 lakh shares
✅ So, any single client can hold max 4 lakh shares equivalent in F&O.
4. Trading Member (Broker) Limit
4. Trading Member (Broker) Limit
A broker (including all its clients) cannot hold more than 15% of MWPL.
15% of 80 lakh = 12 lakh shares
✅ So, a broker + all its clients together can’t cross 12 lakh shares in that stock.
5. Ban List Rule
5. Ban List Rule
If total open interest > 95% of MWPL, i.e. > 76 lakh shares,
then the stock goes into F&O ban list until open interest falls below 80% of MWPL.
➡️➡️➡️Trading Rules⬅️⬅️⬅️
➡️➡️➡️Trading Rules⬅️⬅️⬅️
Midcap Nifty Stocks – OI above 70%
When the Open Interest (OI) in a midcap Nifty stock goes above 70% of MWPL, avoid taking any new trades.
At this stage, operators can drive the stock in either direction.
If you already have any trades, consider closing them.
Midcap Nifty Stocks – OI above 90%
When the OI crosses 90% of MWPL, you can buy both Call and Put options (straddle/strangle) that are 5% above and below the current price.
This strategy helps to capture sharp moves in either direction.
Legal Operator Definition
A “legal operator” can be considered as the participant holding the highest position in that stock’s contracts.
Nifty 50 – Top 20 Large Cap Stocks
Only trade in these top 20 stocks if OI is above 10% of MWPL.
If in all these top 20 large cap stocks the OI collectively rises above 50%, then it is advisable to reduce or close positions.
This is because such conditions often indicate the possibility of a big downward move in the market.
🔹 India VIX
🔹 India VIX
1. What is India VIX?
1. What is India VIX?
India VIX = India Volatility Index.
It measures the expected volatility in Nifty 50 over the next 30 calendar days, based on Nifty options prices.
It is annualized — meaning if VIX = 12, market expects 12% yearly volatility.
It shows magnitude of moves, not direction.
👉 High VIX = market expects bigger swings.
👉 Low VIX = market expects calm, range-bound market.
2. How to convert VIX into daily / weekly / monthly moves?
2. How to convert VIX into daily / weekly / monthly moves?
Since VIX is annualized volatility, we “de-annualize” using the square-root of time rule:
Volatility for D days=VIX×squar-root D/252
Where:
252 = number of trading days in a year
D = number of trading days you want (1 for daily, 5 for week, 21 for month approx.)
3. Example: Nifty = 24,000, India VIX = 12
3. Example: Nifty = 24,000, India VIX = 12
Step A) 1 Day Move (D = 1)
Step A) 1 Day Move (D = 1)
=12× squar-root (1/252) ≈ 12×0.063 = 0.756%
👉 Daily expected move = 24,000×0.756% ≈ 181 points
Step B) 1 Week Move (D = 5)
Step B) 1 Week Move (D = 5)
=12× squar-root (5/252) = 12×0.141 = 1.69%
👉 Weekly expected move = 24,000×1.69% ≈ 405 points
Step C) 1 Month Move (D = 21)
Step C) 1 Month Move (D = 21)
=12× squar-root (21/252) = 12×0.289 = 3.47%
👉 Monthly expected move = 24,000×3.47% ≈ 832 points
✅ Summary (Nifty 24,000, VIX = 12):
1 Day: ±181 points
1 Week: ±405 points
1 Month: ±832 points
This is the 1σ range (68% probability). For a wider 95% confidence, just double these numbers.
4. How traders use VIX
4. How traders use VIX
A) Interpreting levels
A) Interpreting levels
VIX < 12 → Options cheap, low fear → good time to buy options if you expect a move.
VIX > 20 → Options expensive, high fear → good time to sell options if you expect stability.
B) Common strategies
B) Common strategies
Low VIX (calm market):
Buy ATM straddle or strangle → Profits if breakout happens.
Example: Buy 24,000 CE + 24,000 PE when VIX is low.
High VIX (fearful market):
Sell strangle/straddle or use iron condor → Benefit from expensive premiums and IV drop.
Example: Sell 24,000 CE + 24,000 PE, hedge with far OTM options.
Event play (budget, elections, Fed meeting):
VIX rises → Buy options early.
After event → Sell options (IV crush).
Portfolio hedge:
If VIX very low → Buy Nifty Puts for cheap insurance.
If VIX very high → Sell covered calls to earn rich premiums.
5. Key takeaway
5. Key takeaway
India VIX = annualized expected volatility from Nifty options.
Convert it into expected moves using √time formula.
Use it to judge whether options are cheap (buy) or expensive (sell).
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