Module 4 Futures Trading

Chapter 8

All about Shorting

472

M4-Ch8-title

8.1 – Shorting in a nutshell

We briefly discussed shorting in Module 1. However in this chapter we will look at shorting in greater detail. Shorting is a tricky concept because we are not used to shorting in our day to day transaction. For example imagine this transaction – You buy an apartment today for let us say Rs.X, sell it 2 years later for Rs.X+Y. The profit made on the transaction is the incremental value over and above Rs.X, which happens to be Rs.Y. This is a simple and a highly intuitive transaction. In fact most of the day to day transactions requires us to buy something first and sell it later (maybe for a profit or a loss). These are simple to understand transactions and we are used to it. However in a short sale or a just ‘shorting’ we carry out the transactions in the exact opposite direction i.e. to sell first and buy later.

So what would compel a trader to sell something first and then buy it later? Well, it is quite simple – When we believe the price of an asset such as a stock is likely to increase we buy the stock first and sell it later. However, when we believe the price of the stock is going to decline, we usually sell it first and buy it later!

Confused? Well, let me try giving you a rudimentary analogy just so that you can get the gist of the concept at this stage. Imagine your friend and you are watching a nail biting India Pakistan cricket match. Both of you are in a mood for a little wager. You bet that India is going to win the match, and your friend bets that India will lose the match. Quite naturally this means you make money if India wins. Likewise your friend would make money if India were to lose the match. Now for a minute think of the India (as in the Indian cricket team in this context) as a stock trading in the stock market. When you do so, your bet is equivalent to saying that you would make money if the stock goes up (India wins the match), and your friend would make money if the stock goes down (India loses the match). In market parlance, you are long on India and your friend is short on India.

Still confused? May not be I suppose, but I would imagine a few unanswered questions crawling in your mind. If you are completely new to shorting, just remember this one point for now – When you feel the price of a stock is likely to decline, you can make money by shorting the stock. To short stock or futures, you will have to sell first and buy later. In fact the best way to learn shorting is by actually shorting a stock/futures and experiencing the P&L. However in this chapter, I will try and explain all the things you need to know before you go ahead and short the stock/futures.

8.2 – Shorting stocks in the spot market

Before we understand how one can short a stock in the futures market, we need to understand how shorting works in the spot market. Think about the following hypothetical situation –

  1. A trader looks at the daily chart of HCL Technologies Limited and identifies the formation of a bearish Marubuzo
  2. Along with  the bearish Marubuzo, other checklist items (as discussed in TA module) complies as well
    1. Above average volumes
    2. Presence of the resistance level
    3. Indicators confirm
    4. The Risk & Reward ratio is satisfactory
  3. Based on the analysis the trader is convinced that HCL Technologies will decline by at least 2.0% the following day

Now given this outlook, the trader wants to profit by the expected price decline. Hence he decides to short the stock. Let us understand this better by defining the trade –

Stock HCL Technologies
Trade Type Short (sell first and buy later)
Trade Type Short (sell first and buy later)
Trade Duration Intra day
Short Price Rs.1990/-
Number of shares 50
Target Price Rs.1950/-
% Profit Expected 2.0%
Stoploss Rs.2000/-
Risk Rs.10/-
Reward Rs.40/-

As we know, when one shorts a stock or stock futures, the expectation is that the stock price goes down and therefore one can profit out of the falling prices. So from the table above the idea is to short the stock at Rs.1990.

On the trading platform when you are required to short, all you need to do is highlight the stock (or futures contract) you wish to short and press F2 on your trading platform. Doing so invokes the sell order form; enter the quantity and other details before you hit Submit. When you hit submit, the order hits the exchange and assuming it gets filled, you would have created a short open position for yourself.

Anyway, now think about this – When you enter a trading position, under what circumstances would you make a loss? Well, quite obviously you would lose money when the stock price goes against your expected direction. So,

  1. When you short a stock what is the expected directional move?
    1. The expectation is that the stock price would decline, so the directional view is downwards
  2. So when would you start making a loss?
    1. When the stock moves against the expected direction
  3. And what would that be?
    1. This means you will start making a loss if the stock price instead of going down starts to move up

For this reason whenever you short, the stoploss price is always higher than the price at which you have shorted the stock. Therefore from the table above you can see that the short trade entry is Rs.1990/- and the stoploss is Rs.2000/-, which is Rs.10/- higher than the entry price.

Now, after initiating the short trade at Rs.1990/- let us now hypothetically imagine 2 scenarios.

Scenario 1 – The stock price hits the target of Rs.1950/-

In this case the stock has moved as per the expectation. The stock has fallen from Rs.1990/- to Rs.1950/-. Since the target has been achieved, the trader is expected to close the position. As we know in a short position the trader is required to –

  1. First sell @ Rs.1990/- and
  2. Later buy @ Rs.1950/-

In the whole process, the trader would have made a profit equal to the differential between the selling and buying price – i.e. Rs.40/- (1990 – 1950).

If you look at it from another angle (i.e. the usual buy first and sell later angle), this is as good as buying at Rs.1950 and selling at Rs.1990. It is just that the trader has reversed the transaction order by selling first and buying later.

Scenario 2 – The stock price increases to Rs.2000/-

In this case the stock has gone higher than the short price of Rs.1990/-. Recollect when you short, for you to profit the stock needs to decline in price. If the stock price goes up instead then there would be a loss. In this case the stock has gone up, hence there would be a loss –

  1. The trader shorted @ Rs.1990/-. After shorting, the stock went up as opposed to the trader’s expectation
  2. The stock hits Rs.2000/- and triggers the stoploss. To prevent further losses, the trader will have to close the position by buying the stock back.

In the whole process the trader would have suffered a loss of Rs.10/- (2000 – 1990). If you look at it from the regular buy first sell later angle – this transaction is as good as buying at Rs.2000/- and selling at Rs.1990/ , and again if we reverse the order it would be sell first and buy later.

Hopefully the above two scenarios should have convinced you about the fact that, when you short you make money when the price goes down and you lose when the price increases.

8.3 – Shorting in spot (The stock exchange’s perspective)

Shorting in the spot market has one restriction – it strictly has to be done on an intraday basis. Meaning you can initiate the short trade anytime during the day, but you will have to buy back the shares (square off) by end of the day before the market closes. You cannot carry forward the short position for multiple days. To understand why shorting in the spot market is strictly an intraday affair we need to understand how the exchange treats the short position.

When you short in the spot market, you obviously sell first. The moment you sell a stock, the backend process would alert the exchange that you have sold a particular stock. The exchange does not differentiate between a regular selling of stock (from DEMAT account) and a short sale. From their perspective they are of the opinion that you have sold the shares which would obligate you to deliver the same. In order to do so, you need to keep the shares ready in your DEMAT account by next day. However the exchange would know about your obligation only after the market closes and not during the market hours.

Keep the above discussion in the back of your mind. Now for a moment let us assume you have shorted a stock and hope to benefit from the price decline. After you short, the price has not declined as expected and hence you decide to wait for another day. However at the end of the day, exchange would figure out that you have sold shares during the day, hence you would be required to keep these shares ready for delivery. However you do not have these shares for meeting your delivery obligation. This means you will default against your obligation; hence there would be a hefty penalty for this default. This situation is also referred to as “Short Delivery”.

Under a short delivery situation, the exchange would take up the issue and settle it in the auction market. I would encourage you to read this article on Z-Connect which beautifully explains the auction market procedures and how penalty is imposed on the client defaulting on delivery obligation. A piece of advice here, never get into the ‘short delivery’ situation, always make sure you close your short trade before the market close, else the penalty could be as high as 20% above your short price.

Also, this leads us to an important thought – the exchange anyway checks for the obligations after the market closes. Hence before the exchange can run the ‘obligation check’ if one were to cover the short position (by squaring off) then there would be no obligation at all by end of the day. Hence for this reason, shorting in spot market has to be done strictly as an intraday trade without actually carrying forward the delivery obligation.

So does that mean all short positions have to be closed within the day? Not really. A short position created in the futures market can be carried forward overnight.

8.4 – Shorting in the Futures Market

Shorting a stock in the futures segment has no restrictions like shorting the stock in the spot market. In fact this is one of the main reasons why trading in futures is so popular. Remember the ‘futures’ is a derivative instrument that just mimics the movement of its respective underlying. So if the underlying value is going down, so would the futures. This means if you are bearish about a stock then you can initiate a short position on its futures and hold on to the position overnight.

Similar to depositing a margin while initiating a long position, the short position also would require a margin deposit. The margins are similar for both the long and short positions and they do not really change.

To help you understand the ‘Mark to Market’ (M2M) perspective when you short futures, let us take up the following example. Imagine you have shorted HCL Technologies Limited at Rs.1990/-. The lot size is 125. The table below shows the stock price movement over the next few days and the respective M2M –

Day Ref price for M2M Closing Price P&L for the day
01 – (Initiate short) 1990 1982 125 x 8 = 1000
02 1982 1975 125 x 7 + 875
03 1975 1980 125 x 5 = 625
04 1980 1989 125 x 9 = 1125
05 1989 1970 125 x 19 = 2375
06 – (Square off) 1970 1965 125 x 5 = 625

The two lines marked in red highlights the fact that they are loss making days. To get the overall profitability of the trade we could just add up all the M2M values –

+ 1000 + 875 – 625 – 1125 + 2375 + 625

= Rs.3125/-

Alternatively we could look at it as –

(Selling Price – Buying price) * Lot Size

= (1990 – 1965) * 125

= 25*125

=Rs.3125/-

So, shorting futures is very similar to initiating a long futures position, except that when you short you profit only if the price declines. Besides this, the margin requirement and the M2M calculation remains the same.

Shorting is a very integral part of active trading. I would suggest you get as comfortable with initiating a short trade as you would with a long trade.


Key takeaways from this chapter

  1. Shorting requires us to sell first and buy later
  2. Short trade is profitable only when the closing price is lower than the entry price
  3. When the price goes higher than the price at which one has shorted, then there would be a loss
  4. The stoploss in a short trade is always higher than the price at which one has shorted
  5. One can only short on an intraday basis in the spot market
  6. The short positions cannot be carried overnight in the spot market
  7. The short position in the futures market can be carried forward overnight
  8. The margins requirement for both short and long trades are similar
  9. The M2M computation is also similar for both short and long trades

472 comments

  1. NARSIMHA says:

    sir,sorry,couldnt resist asking,is thereany value of technicals in OPTIONS i think its legal gambling? clarify

    • Karthik Rangappa says:

      If you are attempting something without knowledge then of course its gambling :). Technical do play a role in options, will talk more about it when we take up the module on Options.

    • Sandy says:

      Nice Article, thanks . One correction (ref sec :Shorting in the Futures Market) – M2M is “Mark to Market” not “Market to Market”

    • Samarjeet says:

      Hi,
      I want to know if short in Future market and carry it forward multiple days, do we not get Margin ?
      I see there are only 2 order type – MIS & NRML. MIS clearly says with Margin but intraday squareoff.

      NRML – we can carry for multiple days but does this not provide Margin?

  2. Bandana says:

    Dear sir u are doing great job.pls explain me how Arbl shareholders equity is 1059 cr for 2013 instead of 10598 cr.pls reply sir.

  3. Bandana says:

    Dear sir u are doing great job.pls explain me how Arbl shareholders equity is 1059 cr for 2013 instead of 10598 cr.pls reply sir.pls explain about this matter

  4. sushil 12 says:

    great sir…… 🙂

  5. Saurabh says:

    Karthik,

    I don’t check my stocks as much as I check the updates to see if a new chapter has come along .. when is the next one coming? 😀

    • Karthik Rangappa says:

      Lol 🙂 We hope we can live up to the expectation! Next one due in a day or 2! We are onward to warping up the futures module now.

  6. narsima-rn0564 says:

    sir,why cant we hedge futures by sellingone month &buying another month of very high betastokswith high liqidity for long time &then wait for cheklist (as u suggested)&profit differsnce

    • Karthik Rangappa says:

      Yes, you can do that. In fact we have discussed about spread in chapter 10, which will be uploaded in a day or two. Request you to kindly look through the chapter when done.

  7. Hushaam says:

    Hi karthik….Really nice article…and appreciate the efforts in educating with such updates. Wud be glad if you could answer the following queries:-

    1) Does pair trading in stock future segment really generate good returns in volatile market condition…For Example… buying Tata Motors March’15 future & selling M&M March’15 future…

    2) Does insuring the trade help in getting good profits in OTM nifty options like selling 8900 call n buying 9200 call inspite of knowing the fact due to time decay the 9200 call wud be worthless by expiry if nifty remains under 8900.

    3) sometimes certain stock futures trades at discount instead of premium in relation to its spot cash price…does discounted stock futures provides immediate shorting opportunity?

    • Karthik Rangappa says:

      Glad you are liking the posts, my answers are as below –

      1) Yes pair trading can be profitable, but it has to be done in the right way. It includes some quantitative techniques, many traders I know skip these steps and develop a flimsy strategy. So if you are doing a pair trade, make sure you do it the right way. Here is a brief guide for the same – http://tradingqna.com/1014/how-to-do-pair-trading?show=1014#q1014

      2) An insurance is just that, an insurance. You cannot treat this as a way to profit.

      3) No, it could be at a discount because of an anticipated dividend.

      • Hushaam says:

        Thanks Karthik for prompt clarification..Actually, Today I purchased 1300 shares of CAIRN India at Rs.229/- per scrip in EQ-Cash segment under CNC product type using Z-Mobile app. Ideally I should sell them from wednesday, but if i sell it on monday under CNC as BTST trade then will auction penalty get levied on me ? Or shud I wait till I get delivery of aforementioned shares by Tuesday evening into my Demat A/c. and sell thereafter?

  8. ranjith says:

    sir,please help me to know..think that i short nifty at 8500,and i bouht it back at 4875..and that day nifty closes at 4520 do i get proft ?

    • Karthik Rangappa says:

      You short Nifty @ 8500 and buy it back @4875 you make a spectacular profit of 3625 points….after you square off your trade it does not matter where Nifty goes as you are completely out of the market.

  9. Rohit madan says:

    suppose i shorted 200 shares of axis bank, so i just want to know can i carry these stocks for delivery means can i carry these stocks for a week or a month.

    • Karthik Rangappa says:

      No, you cant short in spot market and carry the positions overnight. However you can short and carry the positions overnight in the Futures market.

  10. Ankush Agrawal says:

    As the futures are Marked to Market and the daily debit and credit is adjusted in trading a/c.. So if the account is credited with profit is this amount also blocked like the initial margin?

  11. Ankush Agrawal says:

    Tata Steel april future on Apr 17 Friday.. closed at 347.1 but at satuday LTP is showing 347.8.. But saturday is a holiday.. so why has LTP changed?

    • Karthik Rangappa says:

      LTP of Rs.347.1 is the last traded price and 347.8 is the closing price. There is a difference between the 2. The closing price is the weighted average of the last 30 mins of trading…where as the LTP is just the last price.

  12. Satish says:

    I am layman in futures etc. and just opened Zerodha account. If I buy a futures contract of, say, TCS 1 lot, do I need to sell the future contract after expiry date? Or I just leave it like that and Zerodha takes care of it?

    • Karthik Rangappa says:

      You can manage the trade yourself actively by tracking the TCS futures price…and you can take necessary action if required. Else if you leave it to expiry the exchange will automatically close the position on the expiry day.

  13. ashi valla says:

    Just a small doubt…
    spot market is same as equity market,that is share market?? R8..

  14. ashi valla says:

    Sir,
    and is there any regulations on shorting stocks… I’ve read somewhere that i can only short(borrow) shares when the last trade was a move up..!!!
    plz explain in detail…if there are any hidden regulations by the stock exchange on shorting . Bcoz i believe stock exchange helps companies raise money…so they will be in favour of longing the trades instead of shorting the same..(explain briefly) . I wish to know ur views on the same…

    • Karthik Rangappa says:

      Regulation says you can short stocks intraday only. If you wish to carry your short positions overnight you will have to do it with the help of futures.

  15. Arijit Banerjee says:

    Hi..Kartik,
    if I Buy 1 lot of tata steel today (say 11:00 a.m) and square it off at 1:30 p.m on the same day, then what do I do? As per my knowledge if I open a new order entry and sell 1 lot tata steel, is it really meant to square off? Or the exchance treat the 2nd order as shortselling?

    • Karthik Rangappa says:

      It will be considered a square off. In fact the risk management software will be aware that you already have 1 lot open and this will be squaring off against that order.

  16. Arijit Banerjee says:

    April 21, 2015 at 2:57 pm
    Hi..Karthik,
    if I Buy 1 lot of tata steel today (say 11:00 a.m) and square it off at 1:30 p.m on the same day, then what do I do? As per my knowledge if I open a new order entry and sell 1 lot tata steel, is it really meant to square off? Or the exchance treat the 2nd order as shortselling?

  17. […] here and you got my point. If you are still confused about shorting, I recommend you to go through this article. You don’t need to go there if you are clear with my words in this […]

  18. Monil Hathi says:

    Hi Karthik, Its a very lucid post. Can now easily understand shorting. I need to understand that we can only short in Futures in India. So 1) Do we need to buy back in futures again to cover? and 2) If major shorting happens in futures by professionals and institutions, do they buy back those futures? If no, then how does short covering happen- i.e. How do we say a short covering has happened?

    • Karthik Rangappa says:

      Thanks Monil.

      If you want to short intraday then you have an option to short spot market, but make sure you square it off by 3:20 PM. If you want to short and hold positions overnight then the only option you have is shorting in futures segment.

      1) If you short in futures you can choose to buy it back before expiry or decide to let it expire. If you let it expire exchange will do the needful and make a settlement for you.

      2) Most of the times they do buy back leading to short covering.

      • Akram says:

        Hi Karthik,
        I shorted in crude oil mini futures yesterday night(18 Dec) and forgot that it expires yesterday itself.
        Is it going to be cash settled just like equity futures? My position shows me a debit of 36500.
        Confused with this, help me out.

        • Karthik Rangappa says:

          Akram, this will be settled with DDR( Due date rate) released by MCX on next day. I’d suggest you check this today.

          • Akram says:

            Thanks Karthik.
            My positions​ are clear now and my balance is adjusted accordingly i.e. only cash settled.
            So next time onwards I don’t have to worry if I forget to square off an open position in futures just before expiry, right?

          • Karthik Rangappa says:

            Yes, no worries.

  19. pradeep patel says:

    Hello sir,
    I have one query regarding rollover of contract.if i bought one near month nifty contract , on the expiry it will expired so how can i carried my position ? Is rollover attract more premium by the buyer of the option i mean by rollover buyer of the future need to pay more ????? Or short position gets some amount of premium

    • Karthik Rangappa says:

      You just let the current month contract expiry and buy the nest available contract – this is rollover, as simple as that. There is no angle of extra premium that needs to be paid here.

  20. pradeep patel says:

    Thank u sir for prompt reply

  21. […] here and you got my point. If you are still confused about shorting, I recommend you to go through this article. You don’t need to go there if you are clear with my words in this […]

  22. Abhishek says:

    In short position how we can sell first untill we have not bought it first. coz i think u need to buy first den sell?????? 🙁

    • Karthik Rangappa says:

      Buy first and sell next is called a long position. In short position you exactly do the same expect the order is changed i.e sell first buy later. Think about it a driving from Point A to point B (long position) and driving back from Point B to Point A in reverse gear…in both conditions you drive the same distance but the driving order is changed.

      • Ashwin says:

        Hi Karthik,
        Suppose I go long on a lot of a particular scrip using normal delivery, and I sell one lot of the same scrip, am I covering the previous long or am I entering a new short position?

  23. Rajorshi says:

    Hi –

    I have 2 questions –

    1. It is said that some traders short in order to hedge. I cannot understand why anyone would do that. Hedging basically means trying to protect (your investment, in this case) in some way. So, if you went long and the stock value starts going down, the idea is that you short some other stock so it makes up for your loss to some degree. What I never understood is that if you want to cover your loss, why resort to shorting in particular? You can go long on some other stock. At the end of the day the idea is to compensate using another trade. I really dont understand the relation between hedging and shorting at all.

    2. If I initiate a short position by pressing F2, is it guaranteed that it wont be a “naked short” or do I need to do something to ensure that it is not?

    Regards,
    RT

  24. Sumit says:

    Hi Mr. Karthik, can you pls explain the minimum amount/No. of shares i can short on spot…and does it require any magin on Zerodha

    • Karthik Rangappa says:

      There is nothing like a minimum amount required for shorting (in spot) you can even short 1 share if you want…also margins vary from stock to stock.

  25. Rohit Sharma says:

    Hi Karthik,
    As you have explained above that if after shorting of any stock if we forget to square off then some definite action is taken by exchange
    On 14 aug I did shorting of 2 stocks and I forgot to square off and on 17 aug (15-16 were no trading days) I got following message from broker
    Dear Customer, Code -1667241, Delivery of following securities sold by you in NSE on trade date 14-08-2015 is pending, JINDAL STEEL-600, TATA STEEL LTD.-300, Pls ensure delivery latest by 19-08-2015 before 9 AM.

    How could I do delivery. of stocks

  26. Rohit Sharma says:

    Hi Karthik,
    I just want to know just for the sake of knowledge ( I have joined Zerodha so I would not face such situation) that what can be done from our side after forgetting square off

    And I also want to know why squaring off time
    (zerodha) is 3:20 why not 3:30

    • Karthik Rangappa says:

      Square off time for spot short trades is 3:20 …really not sure why. In case you forget to sq off at 3:20, you could try talking to your broker…he could settle it in the after market window which is open b/w 3:40 to 4:00 (need to confirm the time).

  27. HUSHAAM H.S. says:

    Good Evening Karthik ji,

    Appreciate your efforts in educating us on various derivatives modules through this varsity initiative. Since 2013, I am with zerodha which is pretty proactive brokerage firm as per my experience.

    I follow multiplication shorts strats in Nifty futures, though my strategy may looks wierd but i want to know your feedback as i keep shorting nifty futures at rallies with 2 lots (150qty) at a time positionally (though the total limit is 67lots ie 5025 qty with my trading capital near-about 31 lacs)

    While shorting nifty fut in sip sell mode 2 lots at a time, let say if i initiate shorts from 8100 and with every 50 points rise i short 2lots so on and so forth as I keep very broad range of nifty on upside of even 10000 in a month thats appox 2000 points movement in nifty, still my qty in nifty remains around 3000 qty n balance 2000 qty i keep as cash buffer to meet daily mtm obligations with no margin pressure…. n anytime if i get 80-100points movement in my direction i book out profits by square off buy..

    In 3rd week or last week, i do nifty deep OTM options writing and collect premiums regularly. I personally dont like to hold shares in Demat n investing in equities as I like only nifty futures and options writing more than anything in my life 😉

    Awaiting your feedback/advice from your end to enable me to enhance gains in nifty futures and option writing only.

    God Bless!

    • Karthik Rangappa says:

      HUSHAAM – Since your trading capital is large, this seems ok. However one needs to backtest and validate the strategy across different time frames and develop some quantitative insights. However I guess your approch to Options writing seems to be in the right direction. When you write options you need to be aware of market events – since events can trigger price movements to go against your position. So be doubly sure about this.

      My only advice – dont utilize all your capital towards trading. Its best if you invest some capital in high quality stocks with a long term perspective.

      • HUSHAAM H.S says:

        Many thanks Karthik ji for your kind advice and prompt response. In Pi software, i study heiken ashi n candle sticks charts patterns while shorting nifty futures systematically.

        Generally, I donot write options when big markets events around the corner like elections results, FOMC FED RATE meeting, RBI Credit policy etc as the outcome of such events are not known and often knee jerk reactions are often seen. So I tend to write nifty OTM call options in 2nd half of each month as u know premiums melts faster due to time decay to collect safe premiums around 1lac p.m.

        Since our markets are heavily dependent on FIIs..DIIs…MFs money inflows so once they start exiting from stocks by profit booking and massive selling, as u know falling crude oil prices, greece issues, china slowdown, metals commodity price falls or any bad news due to which markets keeps falling significantly best example is 2008 market crash, I witnessed high quality blue chip stocks getting hamarred badly so i refrain frm investing it in equities.

  28. Rohit Sharma says:

    Hi Karthik,
    Happy diwali to you, your family and to your zerodha team.
    I want to know about STBT. Many tv anchors talk about it. I want to know how this type of trading can be done using Zerodha mobile app
    Thank you

  29. Rohit Sharma says:

    Hi Karthik,
    I want to know whether STBT, BTST both are same?

  30. SARATH says:

    what is the difference between shorting future and shorting spot

    • Karthik Rangappa says:

      Shorting Futures – you get to carry this position forward. Shorting Spot – you have to close the position by EOD.

  31. Manish says:

    Hi , nice article .
    Quick questions aboutg intraday shorting.What I understand is “I will first sell a stock (without actually owning it) and then later sameday I need to buy it to cover my position”.Is it correct?
    How does margin comes in play here.For example, to do a intraday day buy of UNITECH if I am getting 8x margin how this will be computed in case of sell first?

    • Karthik Rangappa says:

      Manish – when you short stocks (in cash) you need to ensure that the position is squared off the same day as short cash positions cannot be carried forward. However when you short futures, the position can be carried forward till expiry…and all future positions need a margin deposit.

  32. Vel says:

    Hello sir, today i tried to short TVS motor but i could not, got messaged as “Rejected”, Could you please assist me how to short in Pi platfor as im new, and is it possible to do STBT (Short today and Buy tomorrow), What key should i use. Thanks in Advance

  33. Vel says:

    Thanks for your reply Karthik, I have sufficient balance on my acct, Could you please tell me that where do i write coding to generate buy or sell orders and how to do that, i have gone through some of pages in zerodha but i could not get exact picture, i tried to do by back test unfortunately i could not, can you please send good guide such as step by step. Thanks in Advance

  34. Vel says:

    Hi Kathik, thanks for your reply and i will check that link. i tried to add Sanco Industries on my market watch but i could not pick that company from drop down menu (Sanco Industries NSE: SANCO ISIN: INE782L01012), Is there any way to search companies manually and add in the Pi platform rather than just pick and add from drop down menu, i could not. Please have look at the company, its not included in the Pi platform or i might be wrong way.

  35. Deepesh says:

    Hi Karthik,
    What amount/margin should be there in my trading Ac. in order to short 1 share of company XYZ at Rs. 100, will it be exactly 100 or else ? Shorting is done in spot
    Thank you

  36. shaffin says:

    Sir i have bought 2 lots in tv18 broadcast 31st march and their position in in delivery, can i short sell extra 2 lots in intra day and carry forward to next day?

    • Karthik Rangappa says:

      There is no concept of ‘delivery’ in derivatives. So If you bought 2 lots of any contract today and sell 2 lots the next day then the position will be squared off.

  37. VAIBHAV says:

    Sir if i have , say , 1 lakh as my trading capital. Can i short stocks worth 8 lakhs ? Thanks in advance

    • Karthik Rangappa says:

      On a notional value, yes you can. For example you can short 2 Nifty lots which itself is about 8L worth of short.

  38. prabhu says:

    sir
    short selling delivery ( not intraday ) fecility available ? if not when you are going to give this fecility is there any plan? tell me please.

  39. Niranjan Justus says:

    HI Zerodha Team,
    Short selling can be done using code MIS right?, that means i have to buy back using same code, or a (buy) square off happens ,my query is: do i get the position as CNC ? bit confused here , waiting your reply

    Thanks
    Niranjan Justus

    • Karthik Rangappa says:

      You can short sell using MIS but do remember all MIS orders have to be closed intraday and you cannot carry forward the position overnight. No, you will not get the position as CNC when you specify MIS order type.

  40. Cyrus says:

    Dear Karthik,
    Great to have such insightful articles on Zerodha which helps rookies like me to better understand the trade of trades. I just have one silly query – In futures intraday when I execute a Short Sell call, do I need to physically buy back the same script ?? for eg.
    @1:30pm I Sold INFY 1 lot (500) for 1180, SL 1185 with Trigger 1175. Now, do I need to Buy Back INFY at 1175/lower????
    and if yes, then is the Sell & Buy order set at the same time or is Buy order set post the execution of Sell order ???

    TIA

    • Karthik Rangappa says:

      I suppose you mean target instead of trigger. To square off the position (and stay profitable) you need to buy the contract back at a lower price….do note you have to buy the contract back, and not the script. You can set the buy order as per your convenience.

  41. Ajay Chandar says:

    Is it permissible to hold a short position overnight on commodity futures?

  42. Santhosh says:

    Hello,
    if i sell any shares in future can i buy tomorrow or til expiry date.

  43. Ajesh says:

    What is short covering? ….as I know shorting in futures can be done for long duration unlike intraday in spot segment. I read ur module that the futures price increases or decreases as per spot price. So my final question is how short covering rallies market price when it is actually sold in futures….

    • Karthik Rangappa says:

      When you square off a short position you are required to buy back futures. When many traders do the same i.e buy futures the price of futures increases drastically. This temporarily influences the spot market.

      • chidambaram says:

        Hi Sir,
        All throughout this module,its mentioned that the future price is derived from spot price.But here in the above comment you say that short covering in the future market will influence the spot price temporarily.
        1.How come future price movement can be a reason(or influence) the spot price movement ( for a short duration)? please explain it in detail with the psychology behind it.
        2. While trying to set up a future trade,which char to be considered?should we need to look at the future’s chart or the spot market chart or any one can be considered or both need to be considered (as both can influence each other).
        4.If future price movement can influence spot price then While trying to set up a spot market trade, which chart to be considered?should we need to look at the future’s chart or the spot market chart or any one can be considered or both need to be considered (as both can influence each other).

        • Karthik Rangappa says:

          1) Both short covering and long unwinding are short-term phenomenon which can influence the market.
          2) I personally prefer the spot charts
          3) Futures influencing the spot is a very short-term phenomenon, this influence cannot last long in the market.

          • chidambaram says:

            Hi sir,
            1. Though the future price influencing the spot is a very short-term phenomenon,how this happens?What is the logic or human physiology behind it? Can you explain it bit detailed with an analogy?
            2.How long (maximum) this future price movement influencing spot can persist (say -few minutes/1 day / 1 week/1 month,etc)
            3.Is that last Thursdays are the only day future contract expiry.If a last Thursday of a month is a holiday ,then the expiry day is the last Wednesday or the previous Thursday?

            Eagerly waiting for a module on Mutual funds.Hope that is also there in your things to do list !!

          • Karthik Rangappa says:

            1) Happens because of the short covering and long unwinding situations in the markets.
            2) Hard to put a timeline here, but yeah, can last upto a day 🙂
            3) Happens on the previous Wednesday

            Hope to do a module on MF soon 🙂

  44. Prathvi says:

    Should we buy it in multiples of lot even for MIS ? Or is it only for F&O

  45. Santhosh says:

    I Bought 500 share of IDEA in 2015 July(Intraday in Equity) for Rs/-180 after that share price gone down and am In loss arround 30k ,still am not sell please suggest some idea.

  46. Pradeep says:

    please give some idea before going to buy any shares,how will take profit,and in future price are different in different expiry date what it means.

  47. Venkata Surya Teja says:

    Hi I hold 50 shares of a particular stock and I intended to sell it. Placed a sell order using CNC mode, now it shows qty as -50 in the dashboard, does this mean that I placed a short sell?? Also if it IS a short sell since I already hold 50 shares in my demat Do I need to square off the position?

  48. latha says:

    dear karthik,
    Say i have purchased 200 shares of Tata motors CNC (Delivery) – cash market on Day 1. On Day 2 i place sell order for 200 shares of Tata Motors CNC and the price has gone down below my sale price on Day 2 – Can i convert the Sale order from CNC to MIS and buy it back at lower rate @ MIS ?

  49. Ajit says:

    dear karthik,can help me how to know that the short positions are created on nifty futures or bank nifty or any another stocks…

    • Karthik Rangappa says:

      Press F2 on your trading terminal and sell 🙂

      You can check your trade book to confirm the same.

  50. Santhosh says:

    Hello Karthik,If I Sell one lot(100 Shares) share at 100.50 is it stock sell at complete 1 lot or 50 share at 100.50 another 50 at other price,Because in Equity if I sell 100 share only some quantity sell at one price depend upon buyer and seller quantity,Please help me.

    • Karthik Rangappa says:

      As long as you place limit order you will be executing the trade as per the price you have specified, irrespective of spot or futures.

  51. SANTHOSH says:

    Hi,Yesterday I bought 1 lot(25 Shares) shares in Eicher [email protected] in JUN30 Future and the price goes down to 18750 and I have a loss around 4175,and the very next day price goes up to 18980 so whats is profit and Loss and how much amount deduced from account please help me briefly.

    • Karthik Rangappa says:

      You lost 167 when the price dropped to 18750 and made 230 points the next day. Your net profit is 63 (230-167)*25 = 1575.

  52. PRADEEP says:

    Hello I bought MRFJUN16FUT so i want to extend to next fifteen days how can i do ,please suggest and is there any charges applied for that.

    • Karthik Rangappa says:

      The contract expires on 30th June 2016, if you want extend beyond 30th June, then you should look at buying July contract.

  53. Santhosh says:

    Hello Karthik,If I BUY MRF 1 Lot for 61220 RS in NRML so I assume that if I don’t have any amount apart from 61220,when the share price goes down of 5000 loss where the amount should be deducted.we need to transfer extra 5000 or not please tell me briefly.

  54. Kanwaljit Singh says:

    Hi.
    I have bought 1 lot of nifty future today in the morning hopeing that the market will go up in the
    near future. Now I would like to short the nifty.
    Kindly clarify if I have to first square off the 1 lot of nifty I have bought in the morning or I can
    go ahead and short the nifty ie sell nifty and subsequently buy at lower level.

  55. Ikhraw says:

    If I short and want to book profits after few hours ,what do I have to do? Do I have to buy the shares and sell it again. Transactions done thrice I.e sell, buy and sell. Pls explain, m not clear with squaring off of short trading.

    Thanks

    • Karthik Rangappa says:

      You just have to buy it back, this would close the position. Its the same thing a buying first, selling later but done in the reverse order.

  56. Kyle D'souza says:

    Shouldn’t M2M be ‘mark to market’, rather than ‘market to market’?

  57. MAHAVISHNU says:

    sell first sbi feature contract 232 and buy tomorrow 230 ( THIS IS PASSABLE NOW PLATFORM OR PI PLATROM )(THIS IS PASSABLE )

  58. MAHAVISHNU says:

    sell sbi feature contract 238 today .. 10 after buy sbi feature contract 228 this is work or not ple tell me

  59. mahavishnu says:

    Feature contract:::: sell first then buy with in expired day. This conditions possibility and Any extra charges applied..

  60. Sumathy Mai says:

    Hi Karthik

    I hold 100 stocks of SBI.

    1. Say, today I sold it at 240 and tomorrow I bought it back at 235 as CNC. Do I need to pay DP charges or as the trade happened within T+2 days, the trade will be treated as STBT.

    2. Can I do an intraday short selling with the stock quantity that I am holding under MIS? I will not be selling more than the quantity that I own as I do not have sufficient margin and intend to turn position to CNC if the price is not my buying range.

    Regards
    Sumathy

    • Sumathy Mai says:

      A small correction in question 2. Can I do an intraday short selling under MIS category with the stock quantity (i.e., SBI 100 Stocks) that I am holding in my portfolio? I will not be selling more than the quantity that I own as I do not have sufficient margin and intend to turn position to CNC if the price is not my buying range.
      -Sumathy

    • Karthik Rangappa says:

      1) When you sell it from CNC the shares are immediately blocked and flushed out…so DP will be applicable.

      2) Yes, you can.

      • Sanjit Singh says:

        Dear Sir, can I do shorting on my buy position or on a stock that I am already holding as CNC. If shorted some quantity of it, will it be treated as being sold from my holding, and when I buy back, will it be considered as buy fresh stock?

        • Karthik Rangappa says:

          Yes, you can. If the intention is to do an intraday trade, then do it using MIS. Even if you do it as CNC, it will be considered intraday (as long as you close the position within the day).

  61. sarath says:

    hy sir,
    when we write in option we will receive the premium , but in future why it is not happen ….please help

  62. ARYAS says:

    can i do short sell in equity intraday pls confirm me

  63. Abhinay says:

    Let’s assume ..
    1. I bought 100 shares of 100rs each totalling=rs 10000 on 1st Sept
    2. on 2nd Sept I sold 100 shares for 110rs with profit 11000, then Later I noticed the stock went down and I bought 100 shares again at rs90 on the same day (2nd Sept)
    3. On 3rd Sept I’ve sold those 100 shares at 110rs ( bought on 2nd Sept)

    Ho much profit will I take home in this scenario.?

    thank you !

    • Karthik Rangappa says:

      On the first trade where you sold @ 100 and bought @ 90 you make Rs.10 per share as profit. On the Second trade where you bought at 90 and sold @ 110 you make Rs.20 per share as profit. So in all 10+20 = 30 per share as profit.

  64. Arjun says:

    Karthik, as we know for every buyer there’s a seller in taking the long position/buying; in day trading it is too important to have massive volume to buy and sell seamlessly as their are literally more buyers and sellers. But i wanna ask you that, in the case of short position, it is said that the shares which are shorted are borrowed from the broker/exchange and when buyed back, the shares borrowed are returned to the broker/exchange. SO, shall i assume that their isn’t any need of volume in short position, as the shares are borrowed from the broker?

    • Karthik Rangappa says:

      Volumes are even more important when you short, becuase there is a risk of getting auctioned if you are unable to buy the shares back (owing to lack of liquidity). Dont worry much about borrowing shares/buying back etc….exchange mechanisms makes it seamless for you. You just have to transact by pressing F2 for sell and F1 for buy.

  65. madhavjj says:

    Dear Sir, Naked shorting of shares is not permitted. Hence for a common trader it is not possible to sell shares which are not in his dp. He can not cover his short sell by purchasing these on the next day. In short ‘Sell today and Buy tomorrow’ is not permitted by brokers.
    I thing, trading in futures allows the common trader to ‘sell short’ by selling a futures contract.
    This, in my opinion is the biggest advantage of futures contract.
    I hope, you highlight this aspect in this chapter. This is the most practical use of the futures.

  66. NareshS says:

    Hi Karthik
    How much sense does it make to use 20x margin to buy in spot market and sell using 20x margin in future market as soon as market opens?
    For example :- today Yes bank Spot range was 48 while future range was 47. I guess it was as a result of time value of future contract?
    Thats a good 1% return if we use 20x margin? Just wondering if there is any catch in this

    • Karthik Rangappa says:

      Remember leverage is a double edged sword and you need to deal with it quite carefully. Also, you cannot use leverage to buy in spot, at least with Zerodha.

  67. aman upkar says:

    sir i am a huge fan of yours. thanks for providing these better platform for trading. sir if i want to do intraday trading but i dont want to use margin or mis. is it possible and please make me understand completely about margin using if i have 100 rupees cash and i want to buy unitech shares priced at. 5 rupees. i am just a begineer. please help me

    • Karthik Rangappa says:

      Happy to know you liked the contents here Amam 🙂

      You can choose not to use margins for intraday trading. In your case if you have 100, then you can buy 20 unitec shares at Rs.5 per share. For this you will have to use NRML as the product code while placing an order. If you choose, MIS, BO or CO, then automatically you are agreeing to use margins. More details explained here – http://zerodha.com/varsity/chapter/margin-m2m/

  68. G Daniel says:

    Is it possible to short any stock in equity for intraday MIS level…
    Iam unable to short the stock BSLIMITED. It gets rejected. I want to short it at start of day and square it by end of day or by 3.20 evening.

  69. DEBOJYOTY DATTA says:

    Nitin Sir,

    Plz help me on the following:

    I have an account cash balance of 20k and I wanted to shortsell that is sell shares of 40k at say 10:45am and buy them for 39k at say 2:15pm. Plz guide me regarding how much profit i will earn or even if the transation is possible or not because I only have 20k in my account

    Thank You

  70. debojyotydatta says:

    One more thing sir can I go long and short for a same stock in Equity on the same day simultaneously ?

  71. debojyotydatta says:

    No sir u didn’t get me there I wanted to say is this

    Suppose i buy 200 shares @20 each in intraday and then the price started to fall say 18.50 per share kepping the loss booked can i start another trade for those same shares but this time in shortsell intraday say i want to short sell 400 of the same shares at 18.50. Is it possible?

    Thank You

    • Karthik Rangappa says:

      You are talking about buying shares, closing the same, and then opening fresh shorts in the same share. Yes, of course you can do this.

  72. Aaqib says:

    Suppose I sold a Call option and did not buy it and let it expire . How does exchange settle it for me ?
    Do I need to pay any additional charges/penalty in the above case?

  73. Parth says:

    Suppose that while looking at the EOD charts for a particular stock (spot market) , I observe a bearish engulfing pattern. Also , the high of that pattern coincides with the resistance level. So clearly my stop-loss would be @ the resistance level . Assume that the resistance is @ 250 . Also , the nearest support for the stock is at 150. Will my target be 150 i.e the support level considering the fact that short trades HAVE to be intraday and it’s not very likely that a stock trading @ the 200 level would drop 50 points in 1 day or rise by 50 points in 1 day? In such a situation , setting the targets and stop-loss @ the resistance and support levels is pretty meaningless because 90% time the stock will not hit that level in a single day.
    So, how am I supposed to determine the stop-loss and resistance levels for short trades ( based on EOD charts)?

    • Karthik Rangappa says:

      This is where you expectations come into pay. One needs to set realistic expectation on what is achievable in an intraday trade. The set up you have explained seems perfect, if I were to trade this myself, I’d short at the earliest given time (maybe at open) and hold the position till 3:15PM and take home whatever is on the table. I’d guess on average one could make about 2-3% (assuming everything is lined well).

      • chidambaram says:

        Hi Sir,
        What would be the stop loss, you would like to keep in this situation ?

        • Karthik Rangappa says:

          SL would be based on support level.

          • chidambaram says:

            Hi sir,
            As per this scenario, in a intraday basis 50 up on a single day is not possible( very rare) and we are doing a intraday short, what should be the stoploss??will stop loss has to be moved on a intraday chart basis (i.e stoploss has to be moved based on 15/30 mins charts)?

          • Karthik Rangappa says:

            I’d suggest you keep the SL based on the candle pattern.

  74. NITIN SHAH says:

    plz let me know that when we r making a short position in options market(i.e. I am selling a lot first and buying it later) is it possible to carry forward the trade,i mean if i am not able to square off the deal on intra-day basis, and if yes what are the additional charges i would be charged for it,if any.

    • Karthik Rangappa says:

      You can short sell the futures contract and carry forward the position over multiple days. However, if you short in the spot market then you need to make sure its squared off within the same day.

  75. kietankit says:

    Hi sir thanks for the well explained post. I would like to know the margin available with Zerodha for Intraday. I have a Zerodha account but in funds section there is no information for my intraday purchase limit. Thanks

  76. RD0300 says:

    Hi Karthik,

    please guide if below can be achieved for weekly BNF

    1. I sell a BNF option of higher price on Wednesday post 3’0 clock
    2. On expiry date I purchase the BNF option.

    thanks
    Devesh

  77. Sudipta says:

    if I Short a stock and then buy it back, does the stocks get transferred to my portfolio

  78. bala7188 says:

    Hi Team Zerodha, 1 question: I hold 1000 shares of IOB in my demat AC at a Avg price 26.32rs. Now I plan to short 1000 shares of IOB for 30rs, EOD I bought 1000 shares for 28rs. What will happen now? Which one will get execute? As I own the share which I short, will my holding is traded in T1 day or which I bought in my intraday. Please correct me if my question wrong?

    • Karthik Rangappa says:

      If you sell using CNC as the product type, then the shares in your demat will get sold. This is as good as selling your shares. If you want to short on an intraday basis, I’d suggest you stick to MIS product type.

  79. Rajesh says:

    Hi. A basic question, if you please. When I short sell a stock in SPOT (not futures), will it block any margin from my trading account like it does for futures. If it does not, there would be a risk that I am unable to buy back the stock EOD in case I dont have enough cash in the account, isnt it?

    • Karthik Rangappa says:

      Yes, there would be money blocked when you short sell (as margins). Since the trade is cash settled, there is no need to have the exact amount in the account.

  80. SAYAN SEN says:

    Hi! I am new to the trading arena. Just to get my feet wet, I have short-sold 2 Infosys shares today. So, if I want to buy them back to cover the trade, how do I do it? Is it a normal buy order for 2 shares that I have to place, or is it any special kind of order that I need to place?

  81. Praveen says:

    Hi I have small confusion regarding Short selling…
    Example :
    If I Sold ULTRACEM using BO Price of 3480 Target of 3475 & SL of 3485 at 02:30pm. and it achieved target at 03.00pm
    as per BO it will square off positions by 03:20pm. Do i need to place separate buy order to close the transaction??????

  82. GAUTAM CHARAN says:

    Sir, can I short sale any equity or there is any limitations. Today I placed order to short sell some shares of MBL infra and my request was cancelled and the status message was “rms:blocked for nse_cm mblinfra-eq mis block type: all”.what does it mean? I am using Zerodha kite as my trading platfrom.

  83. Mehul says:

    Hi karthik
    As you said that we need to square off the position by eod if we short sell in spot market – intra day. But if when i use MIS, wouldn’t it be squared off automatically at 3:20 pm ? So by default there wont be any short delivery. Am i right ?
    Thanks in advance.

  84. vinnu says:

    Can i be able to short a stock in spot market if the stock has already dropped more than 10% in a day or any restrictions in shorting, please confirm.

  85. suraj says:

    Hi karthik

    Suppose I sell the HCL share @ 1900 at day 1 and buy it @ 1800 on day 2. My question is that how much money do I need to have in my account on day One in order to complete the transaction?

    I really appreciate your consistency of answering questions! U r truly inspiring.

    • suraj says:

      If I an a zerodha customer and want to sell future shares ( for shorting purposes)
      1)how many future shares can I sell in one transaction?
      2)for how much time duration(maximum) can I hold them?
      3)does the answers depend on amount of money in my account or my portfolio quality?

      I am trying to build my first strategy. Do you have any suggestions..like links to information

      • Karthik Rangappa says:

        1) You can sell as many as you wish
        2) Till expiry
        3) The number of futures you can short depends on how much money you have in your account.

        If you are starting fresh, I’d advice you to stick to basic ‘buy and hold’ strategy till you get comfortable.

    • Karthik Rangappa says:

      Suraj, you cannot short HCL (or any stock for that matter) on a overnight basis. All shorting in the spot market is on a intraday basis. However, you can short futures and carry the position overnight. In case of futures, you will need funds to the extent of margins required. You can find the margins for stocks here – https://zerodha.com/margin-calculator/Equity/

  86. suraj says:

    Hi karthik
    I am 17 years old and don’t have a demat or even pan card . My question to you is,can I open account in zerodha and use kit connect for making my strategies and back test them on historical data (as I think I know enough coding required for that purpose)

    • Karthik Rangappa says:

      It is mandatory to have a trading account to have a Kite Connect account. Maybe you can open one in your family members name for time being.

  87. AMIT KUMAR PANDEY says:

    sir what will happen if i buy a stock using MIS and at the end of the day there is no buyer and i don’t have additional margin to take delivery?

  88. Raj Kumar says:

    Hello Sir, on what factors the price of futures depends? I had a loss of 5k in Adani ports future of 30th March today. I had gone short, based on the monthly, daily candle stick analysis. Also the bid/ask ratio of the future showed huge volume towards seller side, still the stock future went up from 11:38 am onwards hitting my stoploss. Kindly suggest on what factors this happened?

  89. Dev says:

    Well bit confusing on the Shorting, suppose we Sell 1 share of Rs100 in morning in shorting and buy it in evening at price 80 . well the profit is 20 .
    1) will the share remain with me in the demat account Or
    2) Is it something like i borrow from stock exchange 1 stock and buy EOD to return it back to nullify the borrow.

    Does auto square off takes place for Shorting incase am not able to buy back a share.?

    • Karthik Rangappa says:

      1) No it wont. There are two legs for any trade i.e buy and sell. Its just that when you short, the order of the transaction is reversed.
      2) Something like that.
      3) Ideally, you should ensure you square off the position yourself.

  90. James says:

    Respected sir,
    New to futures trading but it seems to be much easier than I thought, just like Equity but with added advantages. I just want to know if we buy/ short futures, will it need Demat account too. I guess not because the obligation check of exchange will run after the expiry. So no delivery till then! So does this mean –
    1) Can I trade futures just like intraday if I do not wait to square off until expiry?
    For example – if I buy/sell 4 lot of SBIN 29March2017 futures on 21-Mar-17 and keep it bought for 2 day & square off (transfer my position) on 24-Mar-17, does it need Demat, or can I do this imagining as if these 2 days were 2 hours & I was doing intraday just like in equities?
    2) If yes, where does the futures contact in digital form be kept till then? Is it in my trading account or with broker?
    Thanks in advance.
    Regards
    James

    • Karthik Rangappa says:

      1) Yes, you do not need DEMAT for futures trading. Yes, you can do intraday. Not a problem.
      2) Its just maintained as a open position in your trading account.

      • James says:

        In 9 out of 10 cases, stock price reflects sharp decline soon after the record date of dividends due to dividends are paid out to respective shareholders. Is it not an opportunity to sell futures just a few days before record date as there is going to be obvious fall in price (history repeats itself)? If yes, is not better thing to sell Futures (more profitable), instead of buying equity stock in hope of getting dividends?
        Regards
        James

        • Karthik Rangappa says:

          No, futures will already be in a discount factoring in the dividends.

          • James says:

            Sir, JSWSTEEL historical graph (Equity & Near Futures, both) on NSE TAME is showing sudden price drop from 1644.55 to 163.05 on 4-Jan-2017 due to Stock Splits (Old FV 10, New FV 1). But only NSE graph shows this price drop, there is no such imprints on BSE graph as if JSWSTEEL was always trading in 150-200 range on BSE.

            1) Is such a case possible or just a technical rendering issue, because BSE is not showing it but NSE is ?
            2) If yes, can it be an opportunity for active traders to short Near Futures & rolling it over as it is not a dividend case, plus Near Futures graph mimics that of its underlying on NSE TAME ?
            3) What happens to Futures price in such cases of splits?

            Regards,
            James

          • Karthik Rangappa says:

            1) BSE many have adjusted for the split, NSE has not. In this case, BSE charts would be correct. Btw, why are you looking at charts on these sites, have you checked out charting on Kite ? Check this – https://www.youtube.com/watch?v=5M232FaN5Ks&index=10&list=PLkxTRam6E2V-okv6gwQlt6dLTsn0v6CD1

            2) No

            3) Gets adjusted to the post split rates.

  91. Ajay says:

    Hello!

    Can you tell me how to practically short futures OVERNIGHT in the KITE platform? I have experience shorting stocks, but havent held short positions overnight yet. For eg: if I click on ‘S’ for NIFTYFUT, and select NORMAL and some lot size and click Sell button, will that act as an overnight position, or should I do anything more?

  92. Abhijit says:

    can I carry my position(future) overnight if the product is MIS or carrying position over nightis only possible with CNC

    • Karthik Rangappa says:

      MIS should be squared off within the day, before 3:20 PM. CNC for EQ and NRML for derivatives can be carried overnight.

  93. sidharth says:

    https://zerodha.com/margin-calculator/BracketCover/. seems to have a bug. I selected acc 27april and sell. the stoploss is lower than the spot price. Also, both sell and buy stoploss is calculating the same. Can you check and let me if this is right?

    Thanks

  94. Hari krishna says:

    Can we change target price in short selling once it is fixed

  95. Amit says:

    I’ve a question got little confused. I’ve done a short sell by CO today at 179.70. As it was co I exist at 179. As I had done short I have to buy to clear my position so I bought at 179.35

    My question here is if I’ve done short at 179.70 then how come the order got executed at 179 was that because I exist at 179?

  96. Parkash Chander says:

    Can we short ITM CALL OR PUT FOR INTRADAY BASIS, WHEN WE ARE SURE ABOUT TREND.

  97. Krishnal Panara says:

    Sir what if i sold some shares today and i want to buy them after 2 months when price has gone down? Is that Possible?

    • Karthik Rangappa says:

      You cannot short stocks in spot market and hold the position overnight. However, you can do this in futures. You simply short the mid month contract and hold till expiry.

  98. Abinash Senapati says:

    Am i eligible to short a stock using CNC so that i can get 10 minutes more which is 15:20 to 15:30 hrs

  99. Aravind says:

    Dear Karthik,
    Absolutely great post (as your all other posts !)

    I have a small problem using the Stop Loss trigger when shorting equity. For example,
    Price of stock X at 10:00 AM: Rs. 100 —– I sell 100 fictitious shares as MIS
    I go to ‘Positions’, click on the stock X and click on ‘exit’ which brings me to the buy menu.
    I input buy 100 shares at Rs. 95, click on the button ‘Stop loss’ which activates the ‘Trigger price’ blank. If I input Rs. 101 in that, I get an error saying “input value cannot be higher than market value”.
    This logic works when I buy first and sell later to protect my profits (as you said – trailing stop losses). But it always shows an error when I short sell.

    In await of your response,
    Aravind, a happy Zerodha trader 🙂

    • Karthik Rangappa says:

      Happy to know you like all the content here, Arvind.

      Think of the trigger price as a key to activate and fire your SL order. The trigger price has to be a notch higher then the stoploss order. For example if you want to sell at 95, then 95.5 is a good trigger price. Given this, you cannot keep your trigger at a price higher than the current market price as it would be an invalid order. Hence at 101, you get a rejection.

  100. Shivakumar says:

    Can v do pair trading buying 1 lot sail in june futures and short 1 lot sail june futures. please confirm

  101. gopeswar says:

    Here is a doubt , i want to short sell a stock say ,”x” but i don’t have the stock in my trading account , then how i am able to short sell, as you mentioned in short selling, first selling then buying , but if i don’t have the target stock in my account available , how am i able to sell it ??? big confusion need clear and simple explanation

    • Karthik Rangappa says:

      Since it is an intraday trade (EQ can be shorted only on an intraday basis) there is no need for a settlement.

  102. Ravi davara says:

    I can short any equity for intraday only…but i want to know can i short nifty calls and put for intraday or for long term also….???

    • Karthik Rangappa says:

      You cannot short any stock, only a set of stocks are permitted for intraday shorting. Stocks under T2T (BE segment) are not allowed for shorting. Yes, you can short derivative contracts – Futures, Options and carry forward the position overnight….all the way until the contract expires on expiry day.

  103. Abhilash says:

    Sir, I heard if the stock moves to T2T segment, traders cannot take part and it is a place only for Overnight positions with full cash … Those stocks will see in Market watch as XXX-BE …But ,
    1) what if someone SELL XXX-BE, will it directly goes to Auction by default as Short Delivery or the Order will be Rejected by the Exchange ?

    2)what is XXX-BL in Zerodha ?

    • Karthik Rangappa says:

      1) If you do not have the stock in DEMAT, then you cannot short the stock in T2T segment
      2) BL itself

  104. Abhilash says:

    Thank you sir …
    What I mean was , SBIN- BE means it is in T2T segment … SBIN- BL also represent T2T segment ?

  105. manjunathth says:

    Manjunath T H
    Sir, All Your posts and especially about tax is very simple and simply great. I helped me a lot.
    My INTRADAY/SPECULATIVE PROFIT ₹-2,56,626.75, and INTRADAY/SPECULATIVE TURNOVER₹2,62,953.85
    SHORT-TERM PROFIT₹10,660.00 SHORT-TERM TURNOVER₹23,54,562.00. Wheather I need auditing.
    How can I contact varsity tax consultant bcoz I am staying at other city. I just want to file IT and I am not interested in auditing. I am already in losses and I cant go for auditing. I kindly request you to help me regarding this issue.
    Thank you

  106. Prashanth says:

    Dear Karthik, i have been using Zerodha platforms for my trading since 2 years now & extremely satisfied with UI they offer barring some minor glitches during trading hrs at times. I have a typical ask for you, i mainly trade in derivatives & c/f positions esp in banking stocks. I want to understand can one have both (long & short) positions for a single stock? Because, i tend to hedge my positions to block profits/loss whenever it occurs thru MIS which apparently has option to convert my positions overnight but it may square-off my earlier position automatically.

    Your suggestions/views are much appreciated..
    Thanks,P

    • Karthik Rangappa says:

      You cannot have a long and short position on the same stock, the positions would net off against each other. However, you can create a long short in the same stock across two different expires.

  107. Kumar Gunasekaran says:

    Hi i would like to know can we use bracket order in Futures i.e with SL & Target predefined. If so what be the margin Blocked. Is the margin Blocked same as CO

  108. A.Tarachand says:

    I was frantically searching for subjec to this article and I really understoood well. Very well explained any lay man can understand. Thanking you for educating this method of trading. very useful. Many thanks to you all.

  109. Ananta says:

    Hi Karthik,
    I shorted 1 lot of RPower Jul futures at 43.6 on July 18, by end of the day it closed @ 44.05. around 3.6K is deducted from my account. Today Short order is still showing sell price of 43.6. Why? It should be showing 44.05 or at whatever price it closed yesterday right? otherwise why should i wait till today or any day for it to come below 43.6 to make profit having loss everyday. Please clarify my doubt at the earliest. I am a newbie here.

    • Karthik Rangappa says:

      Can you check the positions page today? It should reflect the closing price. Otherwise, I’d suggest you speak to our support executives. Thanks.

  110. Ashish says:

    Hi Karthik,
    Really appreciate your efforts to make us understand the things better.
    I have one question, as future stocking can be done for intraday basis as well but want to know why would anybody want to do that on intraday basis, as they can simply do spot stocking on intraday basis as they also get huge margin for that too?

  111. aju says:

    In the equity cash segment, is it possible to short sell any stock or only certain stocks? if it is only for certain stocks then where can i find a detailed list of these stocks?

  112. Hima Pallela says:

    Hi,

    If I short(sell first and buy later) the future contract intraday(Bracket Order) once order got executed, Does the system place a buy order as well as stoploss order automatically?

    Regards,
    Hima Pallela.

  113. Hitesh Desai says:

    Hi sir can we keep short position in Commodity market means… in commodity like crude oil ??? Pls guide me

  114. Naveen says:

    I have a small doubt and I am sorry if this has already been answered, but it is little difficult to go through all the comments.
    For short selling in spot market you have given 2 scenarios i.e. when you hit the target or hit the stop loss but what if it remains in the middle?

    Is it necessary to have an intraday position when doing a shorting in the spot market?

    Can’t we carry the trade to next day?

    • Karthik Rangappa says:

      Yes, this could be an issue while trading in the spot market. You could get stuck inbetween….however you have no option but to close the position as you cannot carry a short position overnight.

  115. anu says:

    if i use MIS as product code and short any F&O stock in cash segment, there is no possibility of any short delivery. Am i correct?

    • Karthik Rangappa says:

      Chances are low since MMIS orders are squared off at 3:20. However, you need to make sure you are fair and square at the end of the day.

  116. anu says:

    also is there any maximum limit on the number of shares that i can short on intraday in an F&O stock while using MIS (BO/Co orders)?

  117. Pradeep says:

    selling and then buying a stock then should we sell it again?

  118. AJITH THOMAS says:

    Is it possible to short currencies and carry it forward to next days ?

  119. Ishan Choubey says:

    hello,
    in a short trade we are actually borrowing the stock from someone else the exchange takes care of it. But the exchange also borrows from someone say x so if we take up a situation where x has say 100 stocks of company xyz, now a person say y has initiated a short trade at 11:30 of only 1 stock which is borrowed from x by the exchange, now if x decides to sell all his 100 shares at 12:00 and person y still holding that 1 share from that of 100 share of x, then what happens…?

  120. Hanumanth says:

    Hi sir,
    I have small doubt. suppose one share price is 100. I want to buy that share is 110 for intraday (B0) it is triggering that price.
    same share i want sell at 90 it not triggering( It triggering immediately then I ‘m loosing the money). Is there any option to sell particular point .

    Thanks
    Hanumanth

  121. D.Sunil Kumar says:

    Dear Sir,

    My doubt is,

    i am willing to do short selling in Zerodha, and i have money of 10000 Rs in account and i want to buy SBI (sbi present price 275 per share) shares, now zerodha is giving margin of 14 x, that means i can buy a number of shares is 5194
    And my question is – As per Zerodha instructions i need to buy shares and return back on same day before 3:20, now if the share price goes down to after some time to 273 and thereafter i book the profit and brought all 5194 shares for 273, so overall what is the profit in this, can you please explain

    • Karthik Rangappa says:

      Assume this is an intraday trade –

      First, you sell at 275 and then buy it back at 273. This is as good as buying at 273 and selling at 275, except the order is reversed. You will make 2 as profits multiplied by the number of shares.

  122. P.s.perumal says:

    If a ABC company of cash market price of each share is rs 500 today I buy a future of this month contract of ABC company at a strike price of 510 after 10 days the cash market price of ABC company each share price is rs 550 and lot size is 40 for ABC company
    Profit/loss calculation for this above assumption=((550-510)*40)=1600
    Or else like option market irrespective of the price in the Cash market the ltp determines the profit and loss

  123. Manmeet says:

    sir, in margin, when we take a short position & the price goes up we suffer loss. Can we convert it into future before the end of the day or is there any other option by which we can hold the position & avoid loss ?
    Please reply.

  124. D.Sunil Kumar says:

    Dear Sir,

    My Question is..

    1. My capital amount is 50000 Rs and i have taken margin for Andhra Bank in zerodha for shorting purpose and zerodha margin for andhra bank is 14x that means i can sell first 11,904 for 60 Rs per present share price and after some time the market came downwards now Andhra bank shares price is 59 so i saw the opportunity and i brought all the 11,904 shares for 59 in this case what will be profit for me…can you please explain

    Sunil
    Zerodha client

  125. Basha says:

    Hi,
    For example if I short HCL technologies for 1950. Current market price is 1990.
    First I will sell this share at 1990 and buy at 1950 is it correct?
    If I buy at 1950, the share goes down further I will be making loss?

    • Karthik Rangappa says:

      You can short at the current market price i.e 1990….and if it goes down after you short, then you can buy it back…say at 1950. In this case, you will make a profit of Rs.40/-.

  126. Vidur Saini says:

    Hi Karthik,
    Does the trading in the future markets have any effects on the spot price of a stock?
    Meaning, does only the derivative market price mimic the spot market price or can the spot market also mimic the futures market price?

  127. Kshitij says:

    Excellent work on Varsity. Just found out about it. You should teach finance at MBA schools. I slept through mine! Wouldn’t if this is how it is taught.

  128. Rajasekar says:

    Hello,

    Can I do STBT?

    I thought Zerodha is not providing STBT. But recently I came to know from one of my friends that Zerodha also providing STBT on Equity.

    Is it true?

    Please respond as soon as possible

    • Karthik Rangappa says:

      No, you cannot sell today and buy tomorrow on stocks. Shorting on stocks (spot market) is possible only on an intraday basis.

  129. ARUN says:

    Hi Karthik,
    One thing i am seriously concerned is why the CMP in NSE website and zerodha differ?
    Thanks

  130. Harikrishnan s says:

    unable to sell option stock message flashes (Alert !!! Customer is not allowed to place an sell option. He can place only for Squareoff orders, )

  131. Harikrishnan s says:

    exchg not enabled for this acct..

  132. Prakhar says:

    Can i use CNC order type for short sale intraday trade so that these are not automatically squared of by Zerodha.

  133. Saify says:

    Hi Karthik,

    Will i get leverage, if i choose short sell (MIS) ?

    How will this work ? Like if i short sell 10 shares of XYZ for 100 rupees each. Total = 1000.
    After few minutes, the same XYZ shares went down to 90 rupees each, profit of 10 rupees per share (minus taxes).
    The question is, do i need to have the entire 900 rupees in my account to buy back the above shares of XYZ @ 90 (90*10=900) ? How will the leverage works here ??

  134. deepak d says:

    Sir I have doubt regarding short selling of scrip which is already in holding ..suppose if buy xyz scrip @ 100 on Monday and sold it on Tuesday @ 120 ..on same day scrip went to 110 and I did short selling and brought it again .it will show in my holding right? So my question are 1)what is total profit in this case. 2) do I square of (sell) that scrip again after short selling on same day 3) what will be buying price of scrip after short selling in holding 4) which charges will be applied in this kind of short selling.. thank you in advance

    • 1. On Tuesday, the stock you sold and bought back will be treated as an intraday trade and you will be booking a profit of Rs 10.
      2. The shares that you had bought on Monday will remain in your holding
      3. The buying price of Rs 100.
      4. For Tuesday’s trade, intraday brokerage and charges will be applicable

  135. deepak d says:

    Thank you so much sir still I have few doubts regarding this issue ..1) will I get 20rs profit per share as on Monday my buying price was 100 and selling price 120 on Tuesday..2) as you said stocks will remain in my holding after covering short sell with buying price 100. Can resell my holding again if price goes to 125 on SAME DAY? Thanks

  136. Abudhar al Hassan says:

    Hi Karthik,
    You are doing a great job educating newbies like me…:)
    I have a query. Two actually.
    I like to trade using price action (I am still learning) and as you would know, we need past price data to locate major supports and resistances. Now since in future contracts we can’t see the price action for the previous months, the only way to perform any analysis is by looking at the charts of the underlying assets, right? For example, if I want to trade a SBIN future contract, I would have to look at the SBIN equity chart to take a trading decision for the future contract right? Or is there any other way?
    Secondly, since there is no concept of ‘delivery’ in derivatives, there shouldn’t be any auction penalty/short delivery situation while shorting F & O right? What would exactly happen if I am short on a particular future contract and it expires in loss?
    Would appreciate your help. Thanks.
    ~ Abudhar al Hassan.

    • Karthik Rangappa says:

      In fact, you should always look at the underlying’s chart before placing a trade on its derivative.
      Yes, no question of penalty in F&O.

      • Abudhar al Hassan says:

        Hey Karthik,
        Thanks for the reply. I appreciate it.
        How about the commodity market? How can we study their past price action? I am new and kinda learning, so could you please guide me as to how we can analyse the past price action of a certain commodity contract say, Silver or Crudeoil on a chart. I searched a lot and I could only come up with current month’s and the next two contract charts…how can we see the expired contract charts? What would be the underlying for agri/non-agri commodities?
        Also, on a completely different topic, is there any way we can transfer existing funds in our Zerodha account Equity segment to the Commodity segment?
        Thanks for the help.

        ~ Abudhar al Hassan.

  137. Arjun says:

    Hi Karthik, Great Article. I was hovering around small caps stock’s delivery percentage held overnight on NSE website. I saw when the price was broken key support lvl below on that day delivery pct. was greatly increased, which means shorts are holding their positions overnight on non F&O stock (spot mkt).

    So whats your say on that, can institutions hold Shorts overnight?
    Thanks!

  138. arjun says:

    Hi zerodha team

    I want ask whether Short swing is possible for Indian markets in delivery?

    Thanks

  139. shantanu says:

    So when I short sell and square off before the end of the day do these shares into my demat account because i bought them at a lower rate? Will it show in my demat account ?

  140. Balwant singh says:

    Dear sir, i m little confused…
    Let’s assume ..
    1. I bought 100 shares of 100rs each totalling=rs 10000 on 1st December
    2. on 18 dec (after 18 days) I sold 100 shares for 140rs with profit 14000at morning, then Later I noticed the stock went down and I bought 100 shares again at rs120 on the same day (18 dec)
    How much profit will I take home in this scenario and dp charges.?
    My delivery position still from 1 dec or 18 dec, my avg price And what charges
    thank you !

  141. Dr.rajesh says:

    I heard intraday trades are auto squared off.Is it compulsory to buy shares?as it is auto squared off.

  142. jyotshna says:

    If I short sell and don’t buyback on same day, so I have to pay penalty for bad delivery. What if
    1.) In the auction price of particular stock is say 5% down, then I will get good profit ? ( Anyway I have to pay fine ).
    2.) Short means on T+2 days shares will be debited from DEMAT, if someone offline enters shares into demat before delivery ( From ones account to different account ) ?
    3.) Those who didn’t converted their paper share to electronic, if they go to broker and then add to demat.
    This people can avoid penalty ?
    I curious to know answer since only expert can answer and in google also we don’t find answer.

  143. Brahmendra says:

    Hi,
    Recently I read an article that short selling in equities are allowed upto 12 months from 01/01/2018. Is it true? If so what are the margin requirements.
    Regards
    Brahmendra

  144. Gautam Prakash says:

    Is there any way to be short on any script in the long term (say 1week or 1month or more than that). (I do not meen the stocks futures).

  145. Yusuf Rampurawala says:

    shorting means sell first and buy back later. so for selling first i need to have the shares in my demat account in the first place, right?

  146. Swaroop Reddy says:

    Dear sir….I have two doubts
    1)Can we short in options market? for ex: Can we short ABC FEB 2000 CE (Hypothetical stock)
    2)Please provide the margin requirement details….like how much initial capital do we need to short a CE…and when would i be forced to buy back that CE…and in which cases would i need to bring in more cash…and other charges also…If i am using Zerodha…If you want to provide me the client Id i will…

    Thank You.

  147. Swaroop Reddy says:

    sir…!
    let me first tell you the facts of my case..
    consider a stock for which zerodha gives 14 times margin…I have 1000 in my funds….and lets say the stock’s price is 100…now i want to short the stock (not F&O) of course for the intraday…how many shares can i short???

  148. Prathibha says:

    Thanks Karthik
    Wonderful insight on shorting. I have one silly doubt. In long position we get delivery of stocks after two days. If I short any stock, then also the shares will be in my D mat after two days? And should I back the transaction by keeping requisite amount? Or Should I have amount in my account to short? Is there a maximum limit for number of shares one can short?
    Please answer my doubt in a simple way 🙂

    • Karthik Rangappa says:

      Parthibha, when you short a stock in EQ, the same has to square off on an intraday basis. If you short a stock in futures, then you can carry forward the position, as long as you have sufficient margins in your trading account. Also, all derivative contracts are cash settled, hence there is no question of having stock in your DEMAT account.

  149. Dhruv Nawab says:

    Sir,
    Shorting in spot market can be done in any stock or only 210 F&O companies?

  150. Noman gauri says:

    Sir please reply
    I want to hold short selling order for more than 1 day in Future
    How it’s order placed in fno (MIS OR CNC )

  151. Vidya Shastry says:

    Hi Karthik, I’ve just started reading up on your Varsity lessons. I’m very new to trading online, just had some shares from work long ago. Now, I’ve opened an account with Zerodha, and still cannot get a handle on using Kite. I have a question on shorting. When you say sell first, and buy later: does it mean I perform a two step action? First open the Sell window, put in the price in MIS because I want to do intraday trading, then click on sell button. Then I open a Buy window, and put in the price in MIS and press buy. Is that correct? While we are on it, please help me understand how to put stop loss too. Thanks a lot.

    • Karthik Rangappa says:

      Firstly, welcome to Zerodha family, Vidya 🙂
      For understanding Kite and other Zerodha products, I’d suggest you watch our daily Demo, happens twice a day, subscribe to our Youtube channel and you’ll get a notification – https://www.youtube.com/user/zerodhaonline
      For shorting – First, you open a sell window and sell the stock, lets say at 227….now wait for the price to fall, lets say it does to 217, now you open the buy window, buy the shares (same quantity) and with this you’ve successfully shorted i.e sold first @ 227 and bought it back @ 217. If you look at it another way, you’ve essentially bought something @ 217 and sold @ 227, its just you did it in reverse order.

      • Vidya Shastry says:

        Thank you for your very prompt and quick response, Karthik, and for making me part of the Zerodha family. So this encourages me to bother you with more questions! Well, I will only ask if i’m truly floundering. Now, when I open the link you’ve given me, it’s not taking me to the demo, maybe I’ve to look for it.

        Can I please ask a couple more questions here: 1. When I go to buy/sell window, and select Regular, and SL, it gives me a Trigger price and a Price. And in SLM only Trigger price. My question is, when I type in the Price, is this the point of stop loss? If the scrip goes below (in Sell)will the stoploss kick in and I’m protected from further loss? (Opposite in Shorting). What then is the Trigger price?
        2. Should I set up the SL or SLM ONLY AFTER the order is executed and I see it in Positions? And not at the actual time of buying (or selling the stock)?

        Thanks, again.

        • Karthik Rangappa says:

          The demo is live, Vidya. Relayed at 2:30 PM and 6:30 PM on working days. Do subscribe and you will get a notification when the demo starts.

          1) Yes, your price is the SL. The order will be activated when the trigger price is activated. Yes, if the scrip goes below, your SL will pass through. Although it is always advisable to verify if the order has indeed been executed. The trigger price acts as an activation key for your stop loss

          2) Yes, although advanced order types like BO and CO will allow you to place SL orders at the same time.

  152. Vidya Shastry says:

    Morning Karthik!
    I just went to ‘Create a ticket’ on Support at Zerodha. They have all the answers I need! Sorry to take up your time as above. Please disregard the questions. I’ll read through the rest of the Varsity chapters – they are very valuable lessons. Thank you!

  153. Snehansu Pradhan says:

    In case we short a stock say at 11 am does Zerodha automatically square it off before closing of market or we have to manually buy the same quantity and square off the short trade ?

    Can we buy short any quantity irrespective of margin funds ?

  154. Aiyub says:

    On which share shorting is allowed, i am not able to short gss infotech, kindly help

  155. Abhra says:

    If I want to short a stock say 10 quantity quoting presently at Rs 200 each then how much money would I need ? Rs 2000? If I make a loss then from where would be the lost money deducted?

  156. Ahilan Sankaran says:

    Sir, One clarification. Assume If i short a futures contract of say some stock today (which is already in a downtrend for past few days), Will I ever end up in a situation as “I cannot square off the trade later”. My question is today I have sold 4000 shares of XXX ltd to some X for Rs.120/-. Later, my contract cycle will be completed only when I buy the same 4000 shares later from say Y. Will there be any situation like I cannot square it off due to no sellers available ?

    • Karthik Rangappa says:

      Yes, this is possible in situations where the liquidity is low. Hence, it’s recommended that you trade in liquid counters.

      • Ahilan Sankaran says:

        Thanks a bunch. Just one clarity in this. How to identify as to which are the liquid counters ?

        • Karthik Rangappa says:

          The bid-ask spread is a great indicator for this. The smaller the difference between the bid and ask (spread), the liquid it is.

  157. Akshay says:

    Dear Sir,
    i want to short a single lot of banknifty of strick price 25000 (in option) , if current price of same strick price is Rs. 4 so how much amount should be in my account for shorting the same ???

  158. Sumit Dandapat says:

    Can I short sell only in future or we can short sell in equity commodities.

    • Karthik Rangappa says:

      You can short sell any futures – Eq, Commodities, or Currencies and carry forward the position overnight. However, in EQ market you can short sell only for the day.

  159. parvez says:

    sir wanted to know how to know about shorts and long by looking option chain

  160. Saurabh says:

    Today I do intraday in TCS segment I only buy in bracket order and sell it 4 time , all at different price in last trade I buy share but before reaching target I exit , but in open position it show negative quantity. Is this is short selling, and if short selling why not it square off 03:20

    • Karthik Rangappa says:

      Saurabh, we had a technical issue with a service provider today. I’d suggest you call our support desk to double check. Thanks.

      • Saurabh says:

        I raised the issue on 12 april and get ticket no180412303583 , your team revert that Dear Saurabh Kumar,

        Thank you for writing to Zerodha.

        We see that there is no short selling happened yesterday , all position got cleared yesterday only.
        Please get in touch with us if you need any other information through our Support Portal or by calling us on 080-40402020

        Team Zerodha
        Mahesh S Shetti

        After that on 17 april approx 6000/ deducted from free cash. Plz do needful

  161. Atul Kanodia says:

    Nice Article but zerodha is worst service provider they didnt accept own mistake and try to make investor fool.

    • Karthik Rangappa says:

      Atul, thanks for the feedback. If you have a specific issue, I’d request you to write/reach out to our support desk. Thanks.

  162. hari krishna says:

    sir my doubt is when we short, we sell first and buy later. i am not talking about profit or loss. question is,
    1) when i buy the stock does that stock still holds in my trading account, because i am buying it ,what is shorted.
    2) can i use MIS in shorting.

  163. Atul Kanodia says:

    How you managed a fraud company like zerodha which is completely fill with idiots and thieves.

    • Karthik Rangappa says:

      I think your choice of words is quite harsh, nowhere in the history of stock markets in India will you find a company as dedicated to customers as Zerodha is.

      • Atul Kanodia says:

        I think the words are very pleasant for a company like zerodha which are completely dedicated to fraud if dont believe I already said i will mail you the conversation from zerodha but instead of take action on the fraud you believe in deleting the comment so what can I do i will definitely take action against the fraud

        • Karthik Rangappa says:

          What fraud are you talking about, Atul? Have you raised any support tickets for this? If yes, can you please share the number? Thanks.

          • CA. KANODIA ATUL says:

            Ticket no 20180417675286 and this ticket is more than month old and please read the reply of your support team and my reply and tell I already complaint in consumer forum and this week I will complain in sebi I don’t want refund I want the written apology from your promoters. Let consumer forum and sebi decide who is correct.

          • We’ve escalated this to the concerned team and your account opening fee will be refunded within 7 working days. We apologise for the delay in refund

          • CA. KANODIA ATUL says:

            Who is he to apologise in a previous comment I clearly mentioned that I already complaint in a consumer forum and till next week I will complaint to the sebi I want the apologies from your promoters in a proper written way and by the way this is your complaint handling Portal bcz didn’t reply the mail then what is the use of quality team which is fully dedicated to customer. You know why I have written mail, complaining to the authority not for refund only because I am right.

          • Karthik Rangappa says:

            Atul, let’s keep this platform only for learning purpose. Please do not use this platform to rise tickets/flag complaints etc.
            Having said that, I think this has already been escalated.

          • Atul Kanodia says:

            I also agree the same and that’s what I mention in my previous comment but your support team are so worst service provider they didn’t reply the ticket and ready to reply in comment any idea Sir why?

          • Karthik Rangappa says:

            Atul, do you have a ticket number?

          • CA. KANODIA ATUL says:

            I think you are not reading comments ticket number is already provided in previous comment i need to do my procedure . This is my last comment no more comments from my side.

            Thankyou for doing nothing .

  164. CA. KANODIA ATUL says:

    And you are talking about dedication your quality team team stop replying they mentioned that the error happened from their side instead of removing and update your system they try to humiliate me.

  165. Kunal Patidar says:

    I short sell (MIS NRML) Reliance at 995.55 ×50 stocks but after few time it go up . So, I had to exit the position at 999.25 (loss of 3.7 per share) but since the order was MIS NORMAL upon exiting the short sell there was 50 stocks in my portfolio at price of 999.25.

    Till the end of day the price went down to 970 and This caused another loss od approx 29 per share?

    Why this happened if I have already exited the short sell with loss.

    Can you describe more about MIS NORMAL and MIS BO difference.

    • Karthik Rangappa says:

      Kunal, you need not have to worry about this as long as you’ve ensured you have squared off the position. Do check your contract note and also your fund balance at the end of day.

  166. Kunal says:

    Hi ,

    I am fairly new to the concept of shorting , thanks for clearing most of my doubts on shorting by this article. However I just wanted to understand something very basic which I guess you might have already answered above but guess I am not able to understand.
    I’ll place my concerns per below
    1) If I Sell eg : Nifty 10500 31May18 @ 195 today(assuming that I have the margin available) and Buy the same @ 170 on 30th May
    a) would Kite allow me perform this transaction ? If yes What option should I select (MIS/CNC/LIMIT/BO, etc)
    b) would the trade be settled as other trades or this takes time ?
    2) Per my understanding the system would not allow me short sell beyond the margin available , however in an event the trade does not go per expectation , what kind of loss can be controlled
    a) are there any controls within the system that can maybe control the losses ?
    b) if the losses are beyond the margin money , how would that be covered ?

    I don’t know if these have been asked earlier , however I would appreciate if you kindly provide me some clarity on the above concerns as I would like to know the details better before I trade or end up in an unpleasant situation.

    PS: I couldn’t find articles on Sensibull or streak or other tools, If you could maybe please add some articles to use these powerful tools.
    I am super excited to use them ,but have limited knowledge to understand the entire potential of these tools.

    • Karthik Rangappa says:

      1) Yes, you can do this. I’d suggest you opt for MIS if this is an intraday trade, else if you wish to carry forward then you will have to use NRML
      2) The loss will depend on the price of the option. If the loss exceeds the initial margin, then the position will be cut off and money will be recovered

      For articles related to Sensibull and Streak, I think you will find plenty on their blog 🙂

  167. Keshava says:

    Is there any minimum quantity required for shorting stocks unlike in futures where the whole lot is shorted?

  168. Roshan says:

    Dear sir, I have few queries regarding short sell. I am writing what I have understood, please correct me if anything is not right.
    1. Short sell is one day job means I have to log in at say 9.25 am (to sell) and again before market closes (3.19 pm) (to buy)
    2. After selecting stock (those satisfy checklist you have mentioned), in kite mobile app, one have select sell, change to mis
    3. Among market, limit, stop-loss (SL), stop-loss market (SLM), if I select SL
    4. In SL, qty 5 (in short sell one can sell 1 to any number of stocks I guess) of say coal India, price (current market price) say 250,
    Trigger price is (lower price than market price to which one intended to buy) say 240, WHAT IS DISCLOSED QTY.
    5. Next I have to select advance, there are regular, BO,CO,AMO option WHICH ONE TO SELECT.
    6. Where to quote to stop-loss price should be above 250
    7. If both target and stop-loss not reached then one has to buy whatever current market price at 3.19 pm ..
    Thanks

    • Karthik Rangappa says:

      1) This is true if you are shorting in the spot market. If you are short futures, you can carry forward the position up until the expiry
      2) Yes
      3) Yes
      4) Yes, you can select any number you want. Disclosed qty is the number of shares that you want to showcase in the market. This is different from your actual qty
      5) I’d suggest you select a regular order to begin with
      6) Both SL and trigger should be above
      7) Yes. If you have shorted futures, you can carry over the position as well.

      • Roshan says:

        Thanks sir, still confused. I will repeat I want to short sell 5 shares of coal india in spot market (not future). I have selected coal India in kite mobile app, clicked sell, changed to MIS, select SL, qty – 5 , price -(current market price to which I have sold) say 250, trigger price – WHAT IS THAT AND WHAT IS ITS SIGNIFICANCE,, select regular, validity day.. WHERE TO QUOTE stop-loss price.. thanks..

        • Roshan, with MIS you can enter the position with Limit(Sell at a higher price) or SL(sell at a lower price) or Market(at market price) order.
          After you have taken the position, you can place a stop-loss order for exit separately.
          If you want to enter and place a stop-loss at the same time, use cover order(CO) option

  169. Keshava says:

    What is the amount(how much % of the deal) i need to pay while shorting a stock?
    For ex: I short 50 shares of a company @Rs.100.
    How much amount do i need to pay in advance?

  170. rakesh sharma says:

    sir if I short 10 lot of USDINR august future in NRML today at 69.5500 and my target would be 69.0000. if my target didn’t achieve same day .if the closing price would be 69.6000 is it possible to hold that currency future till target met. that is for next couple of days ? or I need to hold till the expiry.?

  171. Bhushan says:

    Hi,
    Can I ‘short’ options (via mis) and carry forward it till expiration (i.e max 3 months)?

    Like: nifty jul 10700 CE or
    Banknifty jul 26500 PE

  172. chidambaram says:

    Hi Sir,
    1. If the shares can be transferred offline (using Delivery instruction slip), then why can’t we short sell in spot market and carry forward a position and within next day evening , we transfer the stocks from some others(friends) Demat account to our demat, so that by the next day evening when we are suppose to give delivery the stock,it would be available in our demat and we can deliver it right?.within this time, once stock price decrease we can by and can’t we give it back to our friend?
    2.I heard that the last Thursday of all months would be highly volatile and there would be high risk in trading as its the expiry date of contract.Why so?Reason?

    • 1. We cannot allow this due to operational constraints. Our system is automated and we cannot manually settle shares in the described fashion.
      2. Only bank nifty weekly options expire every Thursday. All other contracts expire on the last Thursday of every month. The reason there’s volatility is there are more traders on these days as more strategies are applicable due to OI spurts, etc. Karthik can spread more light on this:)

  173. Tushar Talele says:

    Hi
    I just want to know can I carry nifty call & put short till expiry

  174. arun says:

    Hi Karthik,
    Please check i am correct or not-
    1.If i buy NRML with full margin and sold NRML on same day so this would be considered as intraday (like we buy CNC and sell CNC on same day in spot market).
    2. If i short future i can buy back anytime till expiry. Means i can hold short position till EOD of contract also if i wish. if i didn’t buy back then exchange will automatically buy it on contract expiry date.

  175. Ritesh Lakra says:

    Hi Karthik,
    I was watching a movie “Gafla”, in which two men, one broker, and a sub-broker were talking about the word “Banda” or “Vanda”.
    The broker was unhappy with his sub-broker,” are yaar marwayega kya ? Pahle hi din Banda (vanda) kara diya.”
    I want to know what does “Banda” or “vanda” means?

    • Karthik Rangappa says:

      Ritesh, I’m really not sure 🙂

      These I guess were slangs during the open outcry system. Does not have any relevance today 🙂

  176. Guru says:

    Hi Karthik & Faisal,

    Happy teacher’s day. Kudos to you for all the passion you guys have in leaving no question here unanswered. Stay blessed and keep educating us as you are doing now 🙂.

    Kind regards,
    Guru

  177. KP says:

    futures most of time say almost trade at premium due to some carry costs.
    Does this provide inheritent advantage to short sellers for futures as they would be getting some points extra or say downward protection.

    • Karthik Rangappa says:

      Not really, price difference due to the cost of carry is a norm. However, anything beyond (or under) the CoC could be a trading opportunity.

  178. Hari says:

    Hello Karthik Sir,

    I had gone through the blogs before I start trading in future contracts,also I am new to this and a bit familiar in the cash segment.

    Some of the common concepts I have seen here where existing traders were discussed already but still they hits on with my mind with regards to some knowledge gap.

    Can you please clarify on these :

    1. Short buy/sell
    2. Long buy/sell

    Best Regards,
    Harikrushna Sabat

    • Karthik Rangappa says:

      Hari, when the first leg of your trade is a buy (long), then to square this off you’d need to sell the stock. Example buy Infy and then sell Infy.
      When the first leg of your trade is a short sell, then to square off this position you need to buy the stock back. Example, sell (or short) Infy and then buy it back.

      • Hari says:

        thanks so much for your response and it was really helpful Karthik Sir as always !!!

        One thing again – I am quite new to future market – so can you please explain what is the purpose of leverage and what are the min margin that we need to pay when we are going to buy any Future contract ( I guess it should be 12% of total future process that includes 7% of SPAN plus 5% of exposure) ?

  179. Arup says:

    The example says “125 x 7 + 875” but should be “125 x 7 = 875” in the last column on the right.

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