Skip to main content
Learn

What Is the Concept of “Circuit Breaking” as Applied to Index Price Deviation?

A mechanism that halts trading or imposes limits when the derivative's price deviates too far from the underlying Index Price.
Greeks.Live24.11.25

What Is the Concept of “Circuit Breaking” as Applied to Index Price Deviation?

Circuit breaking in this context refers to an exchange mechanism that is triggered when the derivative's trading price deviates excessively from the underlying Index Price. When the deviation threshold is breached, the mechanism may halt trading, adjust price limits, or impose other restrictions.

This prevents the derivative from trading at an unsustainable premium or discount to its fair value, protecting traders from extreme market volatility.

What Happens If the Block Time Deviates Significantly from the Target?
How Does “Basis Risk” Relate to Cash-Settled Derivatives?
How Do Exchanges Use ‘Circuit Breakers’ to Manage Leverage-Induced Volatility?
What Are the Potential Consequences of Setting a TWAP Time Period That Is Too Short or Too Long?

About

Contact

Editorial Policy

Terms of Service

Privacy Policy

Cookie Policy

© 2025 Greeks.Live

All Rights Reserved

Greeks.Live RFQ

Build by Noo on Engine

Source: The content on this website is produced by Greeks.live's proprietary analysis systems, which utilize advanced Large Language Models (LLMs). This information might not be subject to a full human review before publication and may contain errors.
Responsibility: You should not make any financial decisions based solely on the content presented here. We strongly urge you to conduct your own rigorous due diligence and to consult a qualified, independent financial advisor.
Purpose: All information is intended for informational purposes only. It should not be construed as financial, investment, trading, or any other form of professional advice. News and data are not trading signals.
Risk: The cryptocurrency, derivatives, and options markets are highly volatile and carry significant risk. By using this site, you acknowledge these risks and agree that Greeks.live and its affiliates are not responsible for any financial losses you may incur.