If you are new to the stock markets, chances are you have come across repeated mentions of BTST trades or buy today, sell tomorrow trades. Many new entrants are stumped by the question of what is BTST trade.
Well, worry not. Here is an explainer to clear up all your questions on what is BTST in stock markets.
BTST trades are those trades where traders take advantage of short-term volatility by buying today and selling tomorrow. Under this facility, traders can sell the shares- which they have bought previously- before they are delivered to their demat account or before they are credited into their demat account.
In the case of an equity delivery order, the shares you buy are credited to your demat account in T+2 days, where T signifies the day on which shares were traded. The seller, on the other hand, receives credit in his account on the T+2 days as well.
In case, the shares you purchased appreciate in value and you wish to book profit from them, you cannot sell the shares if the order is a normal order. However, if the order is a CNC order, short for a cash and carry order, then you are allowed to sell the shares and book profits.
While the risk isn’t that big, it is still there. There is the smallest possibility that the person from whom you purchased the shares fails to give you the delivery of the stock before the end of trading hours on the next day.
If such an event happens with you, know that the penalty for short delivery is not fixed and is determined by price movement and liquidity. You will be required to cover the difference between your selling price and the price at which the exchange buys the said stock during the auction process. You will be called upon to pay the difference between the price at which you sold your shares and the price at which the exchange purchased shares from the auction.
This price can go as high as 20% or if you are lucky it will be barely 1 or 2%.
A lot of traders carry out BTST trades successfully on an almost daily basis. Many follow the practice of buying shares at the end of the trading day and selling them the next day. You can also execute these trades seamlessly with Motilal Oswal. Your online trading account opening is only a click away.
Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account
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