About Exchange Position Limits
Position Limits are the highest number of options or futures contracts an investor is allowed to hold on one underlying security. The limits are set by Exchanges and / or regulatory bodies to prevent the control and manipulation of the market by a few players, and limit excessive speculation that may destabilize the market.
The focus is typically on speculative positions and a number of commodity exchanges allow exemptions from these limits in cases of bona fide hedges and certain risk management positions to qualified traders and arbitrageurs.
Regulators in the U.S., Asia and Europe are currently considering whether changes are needed in the regulatory regimes that governs the application of Positions Limits.