Zerodha has introduced OI-based (Open Interest-based) order blocks for all derivative contracts covering both index and stock futures & options. When a contract has very low open interest, placing a fresh order in it can be risky due to poor liquidity and the potential for freak trades where orders execute at prices far from the actual market rate.
To protect traders from entering such positions, fresh orders in contracts where OI is below a defined threshold are automatically blocked.
What are freak trades?
A freak trade happens when an order executes at an abnormal price far from where the market is actually trading. This typically occurs in illiquid contracts with very little open interest, where even a small order can move the price significantly. Traders who enter such contracts may find themselves stuck in positions with large unrealised losses and no easy exit.
What gets blocked and what’s allowed?
- Fresh orders are blocked in contracts where OI is below the configured threshold for that tier, product, and order type.
- Some contracts where liquidity and risk manageability are near zero are unconditionally blocked from trading, regardless of OI. These are hard blocks, not OI-threshold checks.
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Exiting positions using limit orders or market orders with market protection is always allowed, regardless of OI levels.
Which segments does this apply to?
- NFO (NSE F&O) index and stock futures & options
- BFO (BSE F&O) index and stock futures & options
- CDS futures and options
- MCX futures and options
- NCO futures and options
Things to keep in mind
- SL orders are evaluated against Limit thresholds.
- SL-M orders are evaluated against Market thresholds.
- Orders placed with Market Protection are evaluated against Limit thresholds (same as SL orders).
If an order is rejected due to an OI block, consider switching to a more liquid contract, typically a nearer expiry or a more actively traded strike. OI levels are checked in real time, so if OI rises above the threshold, fresh orders will be allowed again automatically.