How to buy disposed stocks? Should I take action or wait and see?

Have you ever seen such stocks — skyrocketing over 100% in just one month, yet suddenly becoming difficult to trade, with margin trading and short selling also disabled? This is the legendary Disposal Stock.

So, how to buy disposal stocks? Can you buy them? Will you get trapped? This article explains it all clearly.

First, understand: What is a Disposal Stock?

A disposal stock refers to a stock that exhibits abnormal trading conditions and is included in the Taiwan Stock Exchange’s special observation list.

What constitutes “abnormal”? Simply put, three scenarios:

• Excessive short-term price fluctuations
• Abnormally high turnover rate
• Sudden surge in trading volume

When these indicators “cross the line,” the exchange will first flag the stock as a Watch List stock for alerting, with no trading restrictions. But if the stock remains abnormal for several consecutive days, it will be further upgraded to a Disposal Stock, at which point trading will be strictly limited.

The purpose of these restrictions is clear — to reduce trading difficulty, cool down overheated trading, and encourage investors to think calmly.

How to buy disposal stocks? What are the trading restrictions?

The answer is: you can buy, but not as freely as regular stocks.

Disposal stocks are divided into two stages, with restrictions gradually tightening:

First Disposal Stage

Stocks in this stage can only be matched once every 5 minutes (normal stocks are matched anytime), effectively hitting the “pause button” on trading.

Additionally, if a single buy or sell order exceeds 10 lots or accumulates over 30 lots, collateralized trading must be used — meaning your bank account must have sufficient cash to cover the order, and the system will freeze that amount. Regular stocks allow T+2 (pay after two days), but disposal stocks require full payment upfront.

Margin trading and short selling are suspended at this stage. Want to borrow money to trade? No.

Second Disposal Stage

If the stock’s abnormal conditions persist within 30 days after the first stage, it will enter second disposal.

Restrictions become more severe — matching time extends to every 20 minutes, and all trades must be collateralized. Trading volume often shrinks sharply, making buying and selling extremely difficult.

Disposal Period and Lifting Restrictions

Normally, the disposal period lasts for 10 business days. But if the daily closing volume exceeds 60% of total trading volume, the period extends to 12 business days. After the period ends, the stock is removed from the disposal list.

Below is a comparison of buy/sell conditions between disposal stocks and regular stocks:

How to distinguish between disposal stocks, watch list stocks, and alert stocks?

The evolution path of a stock from normal to abnormal is as follows:

Normal Stock → Watch List Stock → Alert Stock → Disposal Stock

• Normal Stock: No restrictions, margin trading allowed
• Watch List Stock: Abnormal trading but no restrictions, e.g., 30-day increase over 100%, daily turnover rate over 10%, etc.
• Alert Stock: Continues abnormal behavior on top of watch list, and enters disposal list
• Disposal Stock: Meets conditions for 3-5 consecutive trading days on alert list, or any alert stock criteria, with trading restrictions

Will disposal stocks rise? What is their investment value?

This is the core question. The answer: They may rise or fall, depending on the company’s fundamentals.

( Case Study Analysis

Vanguard Electronics ) 6756 ### was classified as a disposal stock in June 2021, even entering the second disposal stage, yet its stock price increased by 24% during that period. The enthusiasm remained, the chips were stable, and it eventually broke out.

But Yang Ming ( 2609 ) had a different experience. Also classified as a disposal stock at the same time, it was reclassified in late July due to “over 6 days of cumulative decline,” and subsequently its stock performance remained sluggish, trapping investors.

These two contrasting outcomes tell us: The trend of disposal stocks depends on the company’s fundamentals, not just trading conditions.

( How to judge if a disposal stock has investment value?

Step 1: Check fundamentals

• Is the company’s core business healthy?
• How are revenue, gross profit margin, net profit trending?
• Is its competitive position in the industry stable?

Step 2: Observe the chips (ownership) Disposal stocks cannot be margin traded, so the flow of major funds becomes more “clean” and visible. Investors can look at closing data to see whether large funds are continuously buying or selling, and decide whether to follow.

Step 3: Assess the stock price position

• Is the stock consolidating sideways during disposal? Avoid if there’s a big drop.
• Is the current price undervalued historically? If truly undervalued, consider entering during disposal, waiting for a rebound after lifting restrictions.

) Market rumor of “the bigger the lock, the bigger the tail”

Many investors believe that during the “lock-up” period, chips are stable, liquidity is low, and once unlocked, the stock will surge again. This has some truth, but also needs caution — if the company faces short selling or negative news during this period, selling the stock becomes extremely difficult, increasing risk.

Key advice: Disposal stocks are just temporary abnormal trading states, not indicators of company quality. Do thorough research before investing, and only buy if the company still has investment value.

How to buy disposal stocks safely? Risks and opportunities coexist

Suitable buying conditions

• Company fundamentals are stable or improving
• Stock price is at a historical low valuation
• You are a long-term investor and can tolerate short-term inconveniences
• There are clear signs of continuous major fund inflows

Not recommended to buy in these situations

• Company has operational issues or financial risks
• Stock shows continuous decline during disposal period
• You are a short-term trader (disposal stocks cannot be day-traded, increasing costs)
• Overall market is in a downtrend

Is long-term holding of disposal stocks feasible?

It is possible, but only if:

1. Fundamentals are solid — stable operations, healthy finances
2. Your risk tolerance is sufficient — disposal stocks tend to be more volatile than regular stocks
3. Market environment supports — macroeconomic improvement, bullish market trend
4. You have strong confidence — believe in the company’s long-term prospects

For long-term investors, longer matching times and trading restrictions are not a big obstacle; in fact, they can help enforce the latest financial reports and better understand the company’s direction.

Final reminder

The answer to how to buy disposal stocks: Make rational decisions based on thorough research, not blindly chasing hype.

The exchange’s restrictions are protective mechanisms aimed at cooling the market. Investors should treat this period as a chance to think calmly, not as a signal to rush into the market. Only when you are confident that the company itself is worth investing in will trading restrictions cease to be an issue.