I recently noticed a rather interesting phenomenon: some stocks suddenly get put on a “blacklist,” making it very difficult to buy and sell them, leaving many people confused. In fact, this is what’s known as “disposal stocks.” Today, let’s talk about this topic.

First, the conclusion: what does “disposal stock” mean? Simply put, it refers to stocks whose trading shows abnormal volatility and that the Taiwan Stock Exchange lists under a special observation category. When their intraday gains/losses swing too much in a short period, their turnover rate is too high, or their trading volume becomes abnormally amplified, these conditions can trigger the designation.

However, there’s a phased process here. A stock doesn’t immediately become a disposal stock overnight. Usually, it’s first classified as an “alert stock,” during which trading is still normal. But if the stock continues to meet the alert-stock criteria for multiple consecutive days, it gets upgraded to a disposal stock, and the trading method becomes restricted accordingly.

So what restrictions do disposal stocks have? The most straightforward difference is that the matching time is longer. Normal stocks can be matched at any time, but disposal stocks must wait 5 minutes or 20 minutes to be matched. What’s more troublesome is that if a single order exceeds 10 lots or the total accumulates to more than 30 lots, circle-restricted trading is required—meaning full payment must be made up front, and you can’t delay payment the way you can with ordinary stocks under T+2 settlement. In addition, margin trading and securities lending are suspended directly, which is a significant blow to traders focused on short-term moves.

If the situation still hasn’t improved, the stock may enter a second disposal phase. At that point, the matching time becomes 20 minutes per cycle, and regardless of how many lots you buy or sell, circle-restricted trading is required—making the difficulty of trading even greater. Investors often jokingly refer to this stage as “sitting in jail” or “being put under house arrest.”

So, can you trade disposal stocks? The answer is yes, but with restrictions. Generally, the disposal period lasts 10 business days. After it expires, the stock is removed from the list. However, during this period, trading volume often drops significantly, and liquidity becomes very poor.

When it comes to investment value, things get more complicated. Some disposal stocks—like Vee-Feng Electronics—can keep rising even after being listed as disposal stocks, with a cumulative gain of 24%. But there are also cases like Yang Ming: it was first added due to excessive gains, later added again due to excessive losses, and afterward the stock price stayed sluggish for a long time.

There’s a saying in the market: “the longer it’s locked, the bigger the tail.” It means that after some popular stocks enter the disposal period, the float/chips tend to become relatively stable. Although liquidity is low, they may surge again after the lock-up is lifted. In situations like this, if you have confidence in the company’s fundamentals, it’s still possible to consider getting involved.

To judge whether a disposal stock has investment value, the core still comes down to the company itself. You can analyze it from two angles: fundamentals and the chips. Fundamentals are about the company’s core business, financial condition, profitability, and so on; the chips mainly focus on capital flow. During the disposal period, margin trading and securities lending are not available, so the movement of main funds tends to be cleaner and easier to assess.

Here’s a small piece of advice: before buying a disposal stock, you should confirm whether the stock price is in a sideways consolidation. If it starts to fall sharply once the disposal period begins, you should avoid it. At the same time, check whether the current stock price is at a reasonable valuation. If you believe it’s undervalued, you may consider entering during the disposal period and waiting for future upside opportunities.

As for whether it’s suitable for long-term holding, that depends on your risk tolerance and investment goals. Disposal stocks do carry higher risk than normal stocks, and abnormal trading behavior may reflect underlying problems. But if you can accept price volatility and have confidence in the company’s development, long-term holding of disposal stocks with stable fundamentals is still an option. Short-term investors are more affected because the matching time is longer and you can’t trade intraday, but long-term investors may be able to see the company’s financial situation more clearly. Overall, what a disposal stock means isn’t complicated—the key is to do your homework and not be frightened by abnormal price swings.