- There are several advantages to investing in the F&O (futures and options) segment.
- However, all the F&Os are not accessible for all the shares.
- This is when thorough research of the F&O stock list will come into play.
- It is to be noted that the F&O stock list, as recommended by SEBI, has approximately 175 equities.
F&O stock list
- The F&O stock list is a collection of stocks that are ideal for trading in the F&O derivatives sector.
- This stock list is sustained by stock exchanges such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India.
- These exchanges have specific criteria for listing the equities in the F&O segment.
- The main factors that are included here are liquidity, market capitalization, and trading volume, which are also very crucial for the traders to consider.
- This stock list will also require equities from various industries, such as banking, IT, pharmaceuticals, and energy.
Rules to keep in mind while choosing the F&O stocks
It is not easy at all to be able to choose the F&O stocks, and so there are several rules.
The three main rules to select the best F&O stocks are as follows:
Only select F&O stocks with very high liquidity
- In the F&O segment, you are required to make quick decisions.
- This is also possible if the F&O stock has ample liquidity.
- For example, as an F&O stock, Infosys Ltd. has very high liquidity.
- Nearly 80,000 futures contracts worth Rs. 3999 crore were traded in April 2022.
- This was because the result of the Infosys Company was declared.
- So, you would be able to enter and exit trades in Infosys easily.
- So, the first rule to select an F&O stock is to ensure that a minimum 3000 contracts are traded on any particular date.
The best F&O stocks are those that experience high volatility
- Volatility is your friend in your F&O segment because there is no point in investing in F&O stocks that don’t move.
- You will only be able to make money in the F&O segment if the stock moves in either direction at a fast pace.
- Thus, you are supposed to look at the stocks that experience high volatility and then trade.
Avoid stocks that are part of the F&O ban list
- Just like the F&O stock list, there is an F&O ban list.
- This list is published by NSE on a daily basis.
- This list will contain the stocks that are not available for trading in the F&O segment.
- This stock list is easily available on the NSE platform.
How does the stock enter the F&O ban list?
- There is a little calculation involved in this process.
- This calculation is based on the Market Wide Position Limit (MWPL) and the aggregate open interest (OI).
- A stock will enter the F&O ban list when its aggregate open interest exceeds 95% of the MWPL.
- A stock will stay on the ban list until the aggregate OI does not fall below 80% of the MWPL.
- These stocks form part of the ban list, so naturally they will not be eligible to trade.
Conclusion
Using the above three rules, you can easily shortlist the best F&O stocks for trading, as there are a total of 199 F&O stocks in India.
Frequently Asked Questions (FAQs)
Q1) How do I select F&O stocks for swing trading?
To select F&O stocks for swing trading, you need to look at stocks with good liquidity.
Q2) Which strategy is best for option buying?
The best strategy for option buying is covered calls, protective puts, and spreads.
Q3) What is the new rule of F&O?
The new rule of the F&O market, as prescribed by SEBI, is bigger lots and higher margins to shield smaller traders.
Q4) What is the safest option strategy?
The safest option strategy is selling cash-secured puts.
Q5) What is the best formula for picking stocks?
The best formula to pick stocks is the P/E ratio.
About Us
Nifty Trading Academy is our academy, where we teach you about the stock market as well as technical analysis. We also provide live market trading and upload blogs for it.