You can only trade Nifty Midcap's current month option and futures contracts. Zerodha restricts trading in other Nifty Midcap contracts because these contracts are illiquid. Trading in illiquid contracts exposes you to several risks:
- Wide bid-ask spreads: Illiquid contracts have wide bid-ask spreads. The bid-ask spread is the difference between the highest price you, as a buyer, are willing to pay and the lowest price a seller is willing to accept. A wider spread increases your trading costs and reduces your profits.
- Limited market depth: Illiquid contracts have limited market depth. The market may not have enough buyers or sellers to execute your trades at the desired prices. This makes it difficult for you to enter or exit positions.
- Increased volatility: Limited trading activity in illiquid contracts causes prices to be more volatile. You may experience sudden and large price movements.
The exchange sets a client-wise position limit for the MIDCPNIFTY contract. On some days, this limit may be lower than the contract's lot size. When this happens, you cannot take new positions or close existing ones on those days.