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Why is CO and BO blocked for bank nifty, stock and currency options?

Bracket and cover orders are blocked for Bank Nifty options [Weekly & monthly] as the position limit of a trading Member (Zerodha in this case) in equity index option contracts (Banknifty option contracts in this case) is higher of Rs.500 crores or 15% of the total Open Interest(OI) in the market in Banknifty option contracts.

Since Zerodha as a Trading Member is breaching the 15% limit of total OI in Banknifty option contracts, we are blocking Banknifty option trading in Cover Order(CO) and Bracket Order(BO) effective 21st April, 2017 to curb any further increase to the OI through Zerodha as BO/CO are highly leveraged products.

You can resume taking intraday Banknifty option trades using the product type MIS.

Here is the webpage on NSE declaring the same rule on position limits of Trading Members under Index Options.

BO and CO are blocked in stock options as they lack liquidity and are very volatile.

BO and CO are blocked in currency options because they are already highly leveraged and allowing more leverage on it is highly risky to you as clients and us as brokers.