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 –
- A trader looks at the daily chart of HCL Technologies Limited and identifies the formation of a bearish Marubuzo
- Along with the bearish Marubuzo, other checklist items (as discussed in TA module) complies as well
- Above average volumes
- Presence of the resistance level
- Indicators confirm
- The Risk & Reward ratio is satisfactory
- 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,
- When you short a stock what is the expected directional move?
- The expectation is that the stock price would decline, so the directional view is downwards
- So when would you start making a loss?
- When the stock moves against the expected direction
- And what would that be?
- 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 –
- First sell @ Rs.1990/- and
- 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 –
- The trader shorted @ Rs.1990/-. After shorting, the stock went up as opposed to the trader’s expectation
- 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
- Shorting requires us to sell first and buy later
- Short trade is profitable only when the closing price is lower than the entry price
- When the price goes higher than the price at which one has shorted, then there would be a loss
- The stoploss in a short trade is always higher than the price at which one has shorted
- One can only short on an intraday basis in the spot market
- The short positions cannot be carried overnight in the spot market
- The short position in the futures market can be carried forward overnight
- The margins requirement for both short and long trades are similar
- The M2M computation is also similar for both short and long trades
sir,sorry,couldnt resist asking,is thereany value of technicals in OPTIONS i think its legal gambling? clarify
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.
Nice Article, thanks . One correction (ref sec :Shorting in the Futures Market) – M2M is “Mark to Market” not “Market to Market”
Thanks so much for pointing this out, must have been a typo. Made the correction.
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?
For NRML, you need to pay full margin amount. Check the margin details here – https://zerodha.com/margin-calculator/Futures/
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.
This is query related to Fundamental Analysis. Have answered the same here – http://zerodha.com/varsity/chapter/understanding-pl-statement-part2/
Hi Karthik, when will the Options Theory & Options Strategy modules be put up? Waiting for the same since ages! 🙂
In due time 🙂 We are eager to start options as well…but before that we need to wrap up Futures! Maybe in another 10 days time.
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
great sir…… 🙂
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? 😀
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.
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
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.
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?
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.
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?
That depends. Usually for liquid stocks selling the next day should not be an issue…but there is no guarantee. Its safest to sell them once it hits your DEMAT account. Also, here is a beautiful article that explains auction and short delivery consequences very well – http://zerodha.com/z-connect/queries/stock-and-fo-queries/consequences-of-short-delivery-nse-bse
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 ?
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.
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.
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.
Hi, Can we short any stock in spot market. or only those in large, mid and small cap stocks. Please clarify this.
Thanks in advance.
Irrespective of the market cap, you can short stocks. Remember, short position has to be closed intraday.
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?
Yes, you will be able to withdraw this once you close the trade completely.
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?
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.
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?
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.
Thanks a lot Karthik for your quick reply. Really appreciate it.
Just a small doubt…
spot market is same as equity market,that is share market?? R8..
Yes sir, its the same.
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…
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.
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?
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.
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?
Yes, it gets squared off.
[…] 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 […]
Some one spammed I guess..
Just a link back from one of our users 🙂
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?
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.
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.
Akram, this will be settled with DDR( Due date rate) released by MCX on next day. I’d suggest you check this today.
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?
Yes, no worries.
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
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.
Thank u sir for prompt reply
[…] 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 […]
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?????? 🙁
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.
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?
If the quantity is same and the order type is CNC then you’d be covering the previous long.
Hi Karthik, very lucid articles and very helpful. I just came across the interesting detail in the above post. My Qn is: say I take long position with one lot of xyz futures with CNC order. Next day, if I sell one lot of xyz futures with MIS order, is this a new intraday short? If so, i can use the MIS orders to hedge my CNC futures positions to manage intraday volatility and unexpected moves in the stock. (I don’t want to use calendar spread due to premia difference and low far month volumes. I want to hold dual positions, one for the larger trend, and the other for managing intraday swings. Since my trades are not big, I can’t buy a full lot equivalent in stock and hedge with futures). Thanks.
Rishi, you certainly can do that. By the when you buy futures for overnight position, you buy under NRML and not CNC 🙂
Also, MIS has to be squared off by the end of the day, so you would anyway be exposed to the gap down opening.
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
For your first question, I would suggest you read this – http://zerodha.com/varsity/chapter/hedging-futures/
2nd query – When you press F2 against an instrument – 2 things can happen (1) if you are already long on the stock then it can square off (2) It can be fresh naked short.
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
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.
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
Rohit – If you are shorting in Equity (spot market) then its mandatory for you to square off the short position by 3:20 PM. Else your short position will attract “bad delivery”. Read more about it here – http://zerodha.com/z-connect/queries/stock-and-fo-queries/consequences-of-short-delivery-nse-bse
If you are shorting in Futures, then you can choose to keep the position open till expiry. Upon expiry if you do not close your position then exchange will take it to “settlement” and credit/debit whatever is due to you.
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
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).
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!
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.
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.
Yes, one needs to be cautious while writing options ard market events. Good luck for all the trading.
Thanks a million Karthik ji for your good wishes!! Cheers n God Bless ?
All the very best!
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
Thanks Rohit, wishing you the same 🙂
Here is link that will help – http://zerodha.com/z-connect/queries/stock-and-fo-queries/btstatst-buyacquire-today-sell-tomorrow
Hi Karthik,
I want to know whether STBT, BTST both are same?
STBT – Sell today Buy t’row. BTST – Buy today sell t’row.
what is the difference between shorting future and shorting spot
Shorting Futures – you get to carry this position forward. Shorting Spot – you have to close the position by EOD.
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?
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.
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
It must be because of insufficient margins. Can you please check on that?
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
Vel – with respect to your earlier query on STBT, no..you cannot do this.
Also, not sure why order was rejected even after having enough margins. I’d suggest you drop an email to [email protected] for this.
Regarding backtesting etc, please check this – http://zerodha.com/z-connect/tradezerodha/pi-tradezerodha/eas-for-auto-buysell-signals-pi
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.
Vel – for all queries related to Pi, I’d suggest you reach out to our support team.
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
You could check our margin calculator for this – https://zerodha.com/margin-calculator/SPAN/
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?
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.
Sir if i have , say , 1 lakh as my trading capital. Can i short stocks worth 8 lakhs ? Thanks in advance
On a notional value, yes you can. For example you can short 2 Nifty lots which itself is about 8L worth of short.
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.
No you cannot short sell in spot and carry it forward.
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
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.
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
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.
Is it permissible to hold a short position overnight on commodity futures?
Yes you can!
Hello,
if i sell any shares in future can i buy tomorrow or til expiry date.
You can square off anytime you wish.
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….
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.
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).
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.
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 !!
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 🙂
Should we buy it in multiples of lot even for MIS ? Or is it only for F&O
And also what about bracket orders?
Its available for both F&O and Spot.
MIS is available for both F&O and spot.
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.
Well, you just need to keep learning and educating yourself.
you didn’t check the charts first you need to read charts whether it is uptrend or donwtrend or sideways
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.
For this you need to read through all the chapters here 🙂
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?
Ah, it just means a debit from your DP, will be adjusted by EOD.
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 ?
I guess you can, suggest speak to our support with regard to this.
dear karthik,can help me how to know that the short positions are created on nifty futures or bank nifty or any another stocks…
Press F2 on your trading terminal and sell 🙂
You can check your trade book to confirm the same.
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.
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.
Hi,Yesterday I bought 1 lot(25 Shares) shares in Eicher Motor@18917 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.
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.
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.
The contract expires on 30th June 2016, if you want extend beyond 30th June, then you should look at buying July contract.
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.
Its always best to have some extra money besides the margin requirement to buffer for M2M losses.
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.
If you intend to short the same quantity as you are long, then you will have to double short. Meaning…if you are long 1 lot, then you will have to short 2 lots…when you do so, 1 lot will be squared off against the 1 long…and the extra short will be your naked short.
Thanks for the reply.
Welcome!
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
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.
Shouldn’t M2M be ‘mark to market’, rather than ‘market to market’?
Marked to Market. Market to Market is clearly a typo 🙂
sell first sbi feature contract 232 and buy tomorrow 230 ( THIS IS PASSABLE NOW PLATFORM OR PI PLATROM )(THIS IS PASSABLE )
Its possible on all platforms.
Once sell first then buy with in expired day. Any extra charges applied..
No, no extra charges are applicable.
sell sbi feature contract 238 today .. 10 after buy sbi feature contract 228 this is work or not ple tell me
Feature contract:::: sell first then buy with in expired day. This conditions possibility and Any extra charges applied..
No.
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
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
Yes you can. But without sufficient margin, how do you intend to short?
1) When you sell it from CNC the shares are immediately blocked and flushed out…so DP will be applicable.
2) Yes, you can.
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?
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).
hy sir,
when we write in option we will receive the premium , but in future why it is not happen ….please help
Because these are twi different instruments and they are structured differently 🙂
Thanks Karthik
Welcome!
can i do short sell in equity intraday pls confirm me
Yes, of course you can.
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 !
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.
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?
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.
I didn’t get it, how will i be unable to buyback shares in any case, and if i decided to buyback shares at right time, doing so, my shares wont be auctioned, so can u pleease clarify that sir?
I am assumin that, the shares we sell n buy back are traded with broker, is it so? Or the shares are bought from the retail traders when buying it back, am confused in this… ?
Yes, its with other traders. Brokers just facilitate the transcation you wish to carry out.
In case there is no liquidity you may get stuck in a situation where you want to buyback, but you may not get a seller.
yeaa, Got it…Thanks Karthik! 🙂
Welcome!
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.
As I mentioned earlier, you can short stocks on a intraday basis.
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
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.
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
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/
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.
No, only a set of stock are permitted. You can find that here – https://zerodha.com/margin-calculator/Equity/
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
You will earn 1K as profits. If you have 20K and wish to take a position for 40K, then you will be using leverage…and based on the stock the levergae will change. Check this for the complete list – https://zerodha.com/margin-calculator/Equity/
One more thing sir can I go long and short for a same stock in Equity on the same day simultaneously ?
No, you cannot as your net position will be zero.
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
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.
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?
No, you need not have to worry about anything especially if you are profitable on the short call position. However, if you have bought and option and it gets into ITM by expiry, then you may want to consider selling it yourself rather than waiting for the exchange to settle it. Request you to read this further – http://zerodha.com/z-connect/queries/stock-and-fo-queries/stt-options-nse-bse-mcx-sx
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)?
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).
Hi Sir,
What would be the stop loss, you would like to keep in this situation ?
SL would be based on support level.
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)?
I’d suggest you keep the SL based on the candle pattern.
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.
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.
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
Check this – https://zerodha.com/margin-calculator/Futures/
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
Of course, you can do this on weekly BN options.
if I Short a stock and then buy it back, does the stocks get transferred to my portfolio
Nope, its cash settled.
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?
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.
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?
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.
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?
Yes, you just place a normal buy back for the same quantity. Ensure you do this before 3:20 PM. Good luck.
Thank you so much! 🙂
Welcome!
Yes, place a normal buy order with the same number of shares. Ensure you do this before 3:20 PM.
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??????
No, once the order is completed, the pending orders are closed automatically. Check this for more details – https://www.google.co.in/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=bracket%20order%20zerodha
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.
You cannot short sell all stocks, there are restrictions. Stocks in BE segments can only be taken in for delivery and no short sale. I’m guessing MBL is under th BE segment.
Thank you sir for your response. BE segment means T2T, right. But MBL infra stock I am talking about is not in BE sagement. I know BE segment stocks can’t be short sold. Is there any restrictions.Any thing that can help to know the stocks to be short sold.
Got it – some scrips, even though not in T2T are blocked for MIS trading. This is because they often hit circuit limits and therefore settlement will be an issue.
You can find the list of stock blocked for MIS here – https://docs.google.com/spreadsheets/d/1-T6RlEE8Gn2fioep_Cmdx9ECRX_WpQbfJJfsU8PdOV8/edit#gid=0
We have put this list in our Resources page, under the utilities section – https://zerodha.com/resources
Got cleared. Thank you sir.
Welcome!
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.
Yes, it gets squared off at 3:20. But no harm double checking the same before 3:30 pm 🙂
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.
In spot market you can short only for intraday. However, futures you can carry forward the positions overnight.
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.
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
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.
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/
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)
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.
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?
You will have to take delivery – although the probability for such a situation to occur is low.
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?
Cant really pin point to a single reason, Raj. It could be a combination of many reasons. You need to ensure your trade complies with a preset checklist, something like the one mentioned in this chapter – http://zerodha.com/varsity/chapter/dow-theory-part-2/ , section 18.6.
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.?
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.
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
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.
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
No, futures will already be in a discount factoring in the dividends.
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
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.
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?
Yup, it does. Logistically, shorting futures is similar to shorting EQ.
can I carry my position(future) overnight if the product is MIS or carrying position over nightis only possible with CNC
MIS should be squared off within the day, before 3:20 PM. CNC for EQ and NRML for derivatives can be carried overnight.
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
Its not a bug. There is a is minimum margin blocked irrespective of stop loss level. If stop loss is increased margin also will be increases.
Thanks but can you let me know why the stoploss is lower than the spot price?
When you buy a stock, your SL is usually lower than the spot. Likewise, when you short the stock, your SL is higher than spot.
I can share a screenshot as it would make it easier for you to understand my query.
ACC 27APR future, sell order (short):
Price: 1469
Stoploss 1414
For a shorting, the stop loss should be higher than the price??
Yes, when you short, SL is higher than your short price.
I short sold an ACC Future BO today and it auto squared off at EOD? Is this correct? I thought we can carry over a derivatives short sell to the the next day and/or expiry of the futures contract?
BO/CO orders are MIS orders, all MIS orders are intraday orders and they get squared off by 3:20 PM.
Thanks Karthik.
Cheers!
Can we change target price in short selling once it is fixed
Of course, you can.
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?
You essential bought it back at 179 I guess.
Can we short ITM CALL OR PUT FOR INTRADAY BASIS, WHEN WE ARE SURE ABOUT TREND.
Of course, you can.
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?
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.
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
Its best if you close all intraday orders by 3:20 PM.
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 🙂
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.
Can v do pair trading buying 1 lot sail in june futures and short 1 lot sail june futures. please confirm
Yes you can. This is calendar spread by the way, not pair trading.
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
Since it is an intraday trade (EQ can be shorted only on an intraday basis) there is no need for a settlement.
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….???
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.
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 ?
1) If you do not have the stock in DEMAT, then you cannot short the stock in T2T segment
2) BL itself
Thank you sir …
What I mean was , SBIN- BE means it is in T2T segment … SBIN- BL also represent T2T segment ?
SBI is not listed under the the T2T category. Anyway, BE/BL represents T2T segment.
Thank you sir … Simply I took an Example of SBIN … that’s all
Sure, good luck!
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
Suggest you post this under the ‘Taxation for Traders’ module here – https://zerodha.com/varsity/chapter/taxation-for-traders/
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
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.
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
Please check this video – https://www.youtube.com/watch?v=2TrYyOHA7P4&index=8&list=PLkxTRam6E2V-okv6gwQlt6dLTsn0v6CD1&t=31s
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.
Most welcome! Happy learning!
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.
Can you check the positions page today? It should reflect the closing price. Otherwise, I’d suggest you speak to our support executives. Thanks.
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?
Well, no particular reason actually 🙂 Futures you can short and carry forward.
So can we carry forward i.e. convert MIS to CNC for future share as well and that too for short trading?
And if that is the case then I suppose we need to have much greater free cash in our account then usual Intraday short future, correct me if wrong.
MIS to NRML is possible in futures. You cannot carry forward a short trade in spot market.
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?
Certain stocks. Here are the list of scrips which are blocked – https://docs.google.com/spreadsheets/d/1-T6RlEE8Gn2fioep_Cmdx9ECRX_WpQbfJJfsU8PdOV8/edit#gid=0
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.
Yes, it does. Check this – https://www.youtube.com/watch?v=2TrYyOHA7P4&index=8&list=PLkxTRam6E2V-okv6gwQlt6dLTsn0v6CD1
Hi sir can we keep short position in Commodity market means… in commodity like crude oil ??? Pls guide me
Yes, you can short the commodities like crude and gold. Learn all about shorting here – https://zerodha.com/varsity/chapter/shorting/
Sir in normal order how much time we can keep that order?
You can have the order in the system till the market closes.
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?
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.
What if I don’t get a seller for the stock I shorted by the end of the day?
You will need to find a buyer for the stock that you shorted. If you are unable to find, then your position is considered bad delivery.
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?
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.
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)?
Not really.
selling and then buying a stock then should we sell it again?
Think of it like
Selling (after borrowing from an imaginary person) @ 1990
Buying (to re-pay the imaginary person) @ 1950
Hence you made a profit of Rs 40 per share.
Nope, not required.
Is it possible to short currencies and carry it forward to next days ?
Yes, you can short currency futures and carry forward the position.
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…?
End of the day its all cash settled, Ishan. So no actual delivery of shares is required.
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
Hanumanth, I’m a little confused with your query. Can you please rephrase your question? Thanks.
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
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.
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
In options, the LTP is determined by the underlying’s price.
Anyway, yes in futures thats how the P&L is calculated.
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.
Nope, they are two different segments.
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
In this case, you will make a profit of Rs.11,904 = (60-59)*11904.
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?
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/-.
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?
Over multiple days the spot influences futures. However, sometimes on an intraday basis, it could be the other way round.
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.
Glad you liked it Kshitij 🙂
Happy learning!
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
No, you cannot sell today and buy tomorrow on stocks. Shorting on stocks (spot market) is possible only on an intraday basis.
Hi Karthik,
One thing i am seriously concerned is why the CMP in NSE website and zerodha differ?
Thanks
They don’t differ, what you see on Zerodha is realtime – as it happens on NSE.
unable to sell option stock message flashes (Alert !!! Customer is not allowed to place an sell option. He can place only for Squareoff orders, )
I guess the contract you are trying to trade is in ‘BAN’, period. Suggest you check with the support once.
exchg not enabled for this acct..
Make sure you have the right segment addition to this account.
Can i use CNC order type for short sale intraday trade so that these are not automatically squared of by Zerodha.
If you do not have the shares in your DEMAT, then you cannot short/sell using CNC.
Thanks
That means I cannot keep short positions after 3 pm if i don’t have shares in my demat account.
True. You cannot sell using CNC if you do not have the shares in your holdings.
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 ??
Yes, you could. You only need a part of that 1000 to short using MIS check this link – https://zerodha.com/margin-calculator/Equity/
Thanks Karthik !
Didn’t expect reply that quick 🙂
Appreciate it.
Cheers!
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
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
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.
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.
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.
We have a module dedicated to Commodities & Currencies, I’d suggest you take a look – https://zerodha.com/varsity/module/commodities-currency-and-interest-rate-futures/
For fund transfer, you will have to withdraw and transfer again.
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!
They can. If not in the F&O, they can even short in the SLBM category. Check this – https://www.nseindia.com/products/content/equities/slbs/slbs.htm
Thanks a lot.
Good luck!
Hi zerodha team
I want ask whether Short swing is possible for Indian markets in delivery?
Thanks
Yes, you need to use Futures for this and not the spot market.
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 ?
No, this will be considered an intraday trade, hence no delivery into the DEMAT account.
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 !
You will book an intraday profit of Rs 2000(Buy @120 and Sell @140).
The buy average for the stock will remain the same at Rs 100 and unrealized profit of Rs 2000(Since LTP is Rs 120).
DP charges wont be charged as there is no debit of shares from your demat account
Thanks Faisal sir
I heard intraday trades are auto squared off.Is it compulsory to buy shares?as it is auto squared off.
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.
1) Yes, check this – https://zerodha.com/z-connect/queries/stock-and-fo-queries/btstatst-buyacquire-today-sell-tomorrow
2) Shares will be debited on the same day, not T+2
3) No, since the conversion of physical to DEMAT takes at least 20 days.
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
No, this is not true. However, I think you are referring to this – https://www.nseindia.com/products/content/equities/slbs/slbs.htm
Dear Karthik,
I read it on famous telugu newspaper Eenadu on 18/11. I have the clipping also with me. The heading goes like this , SEBI allows brokerages to provide short selling contracts up to 12 months.
Regards,
Brahmendra
Ah, maybe they were referring to the contract validity. I’ve not come across any such discussion though.
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).
I’m assuming you are not talking about SLBM aswell. No, this is not possible.
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?
Yes, and you can do this without having shares in your DEMAT.
but if i dont have shares in my demat account only, then how can i sell the shares? kindly elaborate
You can, in fact, the same has been explained in this chpater. You will find a more generic explanation here – https://zerodha.com/varsity/chapter/commonly-used-jargons/
ok thank you so much. i read it. i am reading your other chapters also. very nicely explained. but did not come across fibonacci expansions and stoploss trailing. where can i find those topics? are they upcoming?
I’ve discussed this as well – https://zerodha.com/varsity/chapter/fibonacci-retracements/
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.
1) Yes, you can.
2) You can check this – https://zerodha.com/margin-calculator/SPAN/
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???
This varies stock to stock, I’d suggest you check this – https://zerodha.com/margin-calculator/Equity/
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 🙂
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.
Sir,
Shorting in spot market can be done in any stock or only 210 F&O companies?
You can short scrips which are on this list with leverage using product type MIS. You can also short on other scrips without leverage except for the stocks on this list.
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 )
You need to opt for NRML as the order type to carry the position forward. Also, I’d suggest you attend one of our online demos on YouTube – https://www.youtube.com/user/zerodhaonline. Subscribe to the channel and you will get a notification when the demo starts.
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.
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.
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.
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.
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!
Good luck, Viday. Happy learning 🙂
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 ?
Yes, if its a MIS order, Zerodha will square off the order. However, additional call n trade charges are applicable in the event of Zerodha closing the trade.
What are the additional charges if Zerodha closes the trade ?
Rs.20/- for call n trade charges and plus Rs.20/- for brokerage.
On which share shorting is allowed, i am not able to short gss infotech, kindly help
You can short-sell using MIS as product for all stocks except for those on this list.
You can find this list on our Margin Calculator
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?
Yes, you’d need 2000. In the event of a loss, the money will be deducted from your trading account.
thanks…and is shorting only restricted to Intraday? what is STBT then?
Yes, shorting a stock via the spot market is restricted to intraday. However, you can short the futures and carry forward the position overnight.
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 ?
Yes, this is possible in situations where the liquidity is low. Hence, it’s recommended that you trade in liquid counters.
Thanks a bunch. Just one clarity in this. How to identify as to which are the liquid counters ?
The bid-ask spread is a great indicator for this. The smaller the difference between the bid and ask (spread), the liquid it is.
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 ???
Akshay, I’d suggest you use the Margin calculator here to know the exact money required to take this trade – https://zerodha.com/margin-calculator/SPAN/
Can I short sell only in future or we can short sell in equity commodities.
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.
sir wanted to know how to know about shorts and long by looking option chain
Not sure what mean by this, Parvez. Can you please elaborate? Thanks.
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
Saurabh, we had a technical issue with a service provider today. I’d suggest you call our support desk to double check. Thanks.
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
Saurabh, having someone from our Support Team call you and help you with the same
Nice Article but zerodha is worst service provider they didnt accept own mistake and try to make investor fool.
Atul, thanks for the feedback. If you have a specific issue, I’d request you to write/reach out to our support desk. Thanks.
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.
1) No, there is no exchange of shares here
2) Yes, you can.
How you managed a fraud company like zerodha which is completely fill with idiots and thieves.
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.
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
What fraud are you talking about, Atul? Have you raised any support tickets for this? If yes, can you please share the number? Thanks.
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
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.
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.
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?
Atul, do you have a ticket number?
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 .
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.
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.
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.
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.
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 🙂
Is there any minimum quantity required for shorting stocks unlike in futures where the whole lot is shorted?
Yes, you can short in the multiples of lot sizes.
If i do not want to short i futures.
What if i short normal stocks?
YOu can, but ensure you buy it back before the EOD.
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
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.
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
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?
This depends on the leverage in MIS and varies stock to stock. I’d suggest you check this – https://zerodha.com/margin-calculator/Equity/
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.?
Yes, you can continue to hold the position till expiry. No problem with that.
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
Or i need to use NRML?
Yes, you’d need NRML to carry positions overnight.
MIS is an intraday product, so you cannot carry forward MIS positions.
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:)
Hi
I just want to know can I carry nifty call & put short till expiry
Yes, you certainly can!
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.
1) Yes, it could be considered as an intraday trade
2) Yes. However, with the implementation of Physical Delivery, you may not really be required to hold until expiry. Check this – https://zerodha.com/z-connect/tradezerodha/policy-on-settlement-of-compulsory-delivery-derivative-contracts
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?
Ritesh, I’m really not sure 🙂
These I guess were slangs during the open outcry system. Does not have any relevance today 🙂
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
Thank you so much, Guru 🙂
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.
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.
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
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.
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) ?
Hari, you can check the margins here – https://zerodha.com/margin-calculator/SPAN/.
The example says “125 x 7 + 875” but should be “125 x 7 = 875” in the last column on the right.
Ah, yes. Thanks for pointing this out.
sir, if i sell first @100 and then exit the order @70, then stil i have to buy??? or it is done??
Its done, Rahul, no need to buy again.
Hello,
How can I short sell shares I already have in my Demat account?
Once, I buy the shares do the shares come into my demat account, or it gets squared off?
Thank you.
You have to select MIS as the product type.
Dear Sir,
Are we required to square off the short position at the end of the day, even though we’ve set a Stop Loss for the trade? I don’t get it. The very meaning of stoploss is that it automatically buys or sells at (around) the trigger price. Right?
Thank you very much in advance.
If this is a short position in the EQ market, then the position has to be squared off by end of the day to avoid the consequences of a ‘short delivery’ – https://zerodha.com/z-connect/queries/stock-and-fo-queries/consequences-of-short-delivery-nse-bse
However, you can roll over your futures position overnight, there is no problem with it.
why does anyone short sale a stock by borrowing the shares when they can just short it on the future market.
Futures requires you to short to the extent of the lot size (therefore margin required), but in spot market, you can shot even 1 share. However, your short positions in the spot market has to be squared off the same day before the market closes.
I was refering to stock lending and borrowing i.e SLB in which trader borrows shares at a certain rate of interest for specific time period .
Ah, yes, SLB is a different platform. You can short by borrowing the stock.
Sir is there any way to know rollover data like how much % are bullish(long) and how much % are bearish (shorting) a stock future before hand. Can u provide graph name – link where we can we see this information pleaae
Not really, Pavan. The % increase in OI has to be associated with the price action. Remember, on its own, nither OI or volume gives any valuable information.
Great work sir!! I just wanted to ask that can we short sell futures and carry the position overnight using nrml without buying on the same day ?
Yes, of course, you can.
What is the meaning of ‘covering shorts’. Why do we see increase in spot price of an asset when traders ‘cover their short positions’?
Short covering means that the short positions are being closed…therefore the short sellers are buying back.
Can I sell a share and then buy after a long time is possible in positional trading?
Not possible using cash segment.You can do this via futures..
Yes, you certainly can.
What are the charges for short selling, how much and what are the taxes that are to be paid?
The charges are similar to the ones applicable going long. I’d suggest you check this – https://zerodha.com/brokerage-calculator
Today i tried to trade in short selling but could not sell mukta arts share.
with this message my order was declined (RMS:Blocked for nse_cm MUKTAARTS-EQ MIS block type: ALL)
so my questions are:-
i) Why this happened
ii) What is rms and who is rms
iii) what is margin calculator
Please reply soon
1) This share is not allowed for intraday trading
2) RMS is the risk management system of the broker
3) A calculator which allows you to calculate the margin required before placing a trade – https://zerodha.com/margin-calculator/SPAN/
Hi Karthik,
First up all Thanks for such gr8 explanation about each topic, learning lot of new thing. keep it up.
I have one question may I able to sell my shares on auction market (if yes how?)
Not directly, but the broker will do this on your behalf.
Hi sir,
I bought a futures(NRML) position. Suppose The next day , I saw the stock price is falling. So I wanted to short(MIS) on the futures contract that too intraday just to make some profit. If the stock price instead of falling, raised. Now I want to keep the position overnight( convert MIS to NRML). That means I would have both Buy and Sell future positions of the same company share at the same. Is it possible? i.e, when I convert the MIS to NRML, will it square off the existing NRML position or it will be a different position.
Vamsi, you just have to square off the MIS short position initiated the next day. This will net off your MIS position but your overnight position stays.
I want to keep the MIS position overnight as it may cause lose if I square-off. In that case will that square off existing NRML position or it would a different position?
You need to convert the MIS position to NRML, Vamsi.
Dear Vamsi krishna
Yes, it will square off the existing NRML position.
Hi Karthik,
Firstly, a big thanks to you for these articles…They are easy to read and understand.
I had a couple of queries.
a. If I want to short futures and hold the position overnight, it has to be Normal order and not MIS, BO or CO. Is this understanding correct?
b. How do we rollover a position? – Meaning, if I hold a position for the current month…..what steps should I follow to roll over the holding to the next month?
1) You need to opt for NRML
2) You will have to square off the current month contract and initiate the same position, same quantity in the next month contract.
Hi,
Do we require any margin for Short Selling an Equity Stock in IntraDay? I checked on the SPAN calculator but it only showed me MIS leverage 12X/5X etc available to BUY but no mention of SHORT SELL in IntraDay.
Like at 9.30AM I short sell with 0 funds in trading account, then around noon same day add funds and buy/square off? Is it like that?
The leverage is for both buy and sell. You need to have funds without which you cannot initiate any position.
Ok so if the calculator tells me for ₹5000, I can buy say 500 shares of X Ltd then I can short 500 shares of X Ltd with ₹5000 margin.
You can use this, Chirag – https://zerodha.com/margin-calculator/SPAN/
Hello Karthik,
Am new to trade and confused about Short Selling trade.
1.Is there any limit(or %) of money to hold when i sell first(when i enter short selling)
2.Example: If Sell first Buy back done at EOD, is really i have to bought the shares at end of the day OR
Only i get profit/Loss amount added to me?
3.If sell first and didn’t buy back at end of the day then penalty is 20% from the share amount
ex: 10quantity 100Rs each and total 1000Rs. amount worth
Kindly help us to understand.
Thanks.
1) Yes, this is called margins and this is the same amount required for futures
2) Only P&L
3) Yes, this is the auction. More on that here – https://zerodha.com/z-connect/queries/stock-and-fo-queries/consequences-of-short-delivery-nse-bse
sir can i square off futures order whenever i want or it will square of on its expiry
You can sq off whenever you can.
Sir,
At the End of the day is Automatic Square off option is there for Short selling of Equity Intraday on cash market (CNC) for
Group “A” stocks???
With Regards,
Rahul
Not for CNC, but if you don’t square off the MIS position, then the same will be automatically squared off at market. However, this will attract an additional charge of Rs.20.
Sir,
Ok, morning If I short sell an equity share in spot market and I didn’t square off manually at end of the day then what will happen ?
RMS team of zerodha will square it off and call and trade charges apply
Hi,
So when you explained the different candlestick formations, you said shorting was an option for bearish trends. If I opt to short at 3.20pm after seeing the candlestick form, won’t I be needing to square of 10 min later when the market closes? Or does it mean I should be carrying out a futures trade at that point?
You can always short in the futures or options market, Anjaly.
Hello Karthik,
Thanks for all the useful material. I had a question: You wrote that a short position in the futures market could be carried over multiple days. How many days are we talking about? Can be carry this position till the expiry?
Yes, by multiple days I mean up to the expiry day.
Hello Karthik,
I had one more question about how futures contracts are settled. I know Nifty futures are settled in cash as there no physical security to be exchanged in this case. But If I already possess physical securities, I can use these securities against any short futures positions, can’t I? In this case, i have to allow the contract to expire don’t I? But i am a little confused as I heard somewhere that all futures contracts are cash settled these days. What does it mean?
Settlement procedure has changed a bit now. Yes, you can use the securities in your account if you are short futures. Check this – https://support.zerodha.com/category/trading-and-markets/margin-leverage-and-product-and-order-types/articles/policy-on-physical-settlement
Hello.
You clearly mentioned that in spot trading, shorting is allowed only in Intraday type.
Why is that so ?
Isn’t only Naked short selling banned ?
Covered Short Selling must be possible isn’t it ?
https://www.investopedia.com/ask/answers/09/short-selling-india.asp
Thank You !
This is because of the operational procedures does not allow you to carry forward the short positions. A covered call is possible with spot (you are long) and OTM call options which you sell.
Sir, Whenever I tried to make Short stocks or Short Futures, system always giving notification window that Rejected, & gives reply that “Strike price is outside the allowed range. Try a strike closer to the spot price”. This is regularly shown, I don’t know what to do
I’d request you to check this – https://support.zerodha.com/category/trading-and-markets/kite-web-and-mobile/articles/why-did-my-bank-nifty-option-order-get-rejected
Hi,
I want to know about the short futures lot (under NRML) which we could not square off on expiry. How does the exchange decide the price? Can we also roll over the position?
It is based on the closing price on the expiry day. The closing price is the weighted average of the last 30 mins.
Hi. I am new to this and have started to acclimatise myself with the trading console by buying and selling one share per stock. I sold one stock and then bought it to make a profit. But do I need this bought stock again as it kept showing up in my portfolio.
Thanks a lot for the advice. And these articles are just amazing.
Congrats on your first trade 🙂
No, if you have sold first and bought it back, it wont show up in your portfolio/holdings.
Sir, this might be a lame question. Shorting is spot market is limited to only intraday basis right! Then, If i am buying some 100 shares of ABC for positional (CNC), who is selling those 100 stocks to me?
Yes, shorting shares is possible only on an intraday basis. When you buy shares in CNC that means someone else is selling that to you from CNC, which is different compared to shorting.
shorting in*
Thanks sir! Then how does the ‘someone’ gets those share initially…
Has to be bought from the market 🙂
very usefull article thank you sir
Happy to note that, Rishi!
sir can we hold short position in future for more than one day
Yes, you can do that and carry forward your position overnight.
yes, the purpose of shorting futures is you can hold it till expiry.;-)
Sir i have sold “CRUDEOILM AUG FUT” ( under Product NRML ) one lot @ 3790 and the other @ 3757 but was unable to buy them back due to higher prices. What will happen to shares and will i be able to carry farward them next session until expiry.
You can carry forward the position, as long as you have the margins to carry the position.
Sir i have sold “CRUDEOILM AUG FUT” ( under Product NRML ) one lot @ 3790 and the other @ 3757 but was unable to buy ( both of them ) them back due to higher prices. after trading session both transactions went to CANCELLED status. What will happen to shares and will i be able to carry farward them next session until expiry. Will there be any penalty for not buying. ( Same as previous query added few more doubts ).
Do we have to do something other than just selling in NRML mode to make them carry to next day or exchange or broker does it?
Or since both transactions got CANCELLED broker gets the commission and debit my account with loss
Like I mentioned, you just need to ensure you have enough margins to carry forward the position.
Sir,
In the streak -zerodha, there are some facilities of creating as well as deploying strategies in terms of parameter. Now if u see the DMA strategy, it starts with shot selling the stock and then buy.
Now if i download the backtest result, there are number of incidents where short selling is done on x date and buy of the same is on another/next day.
Please guide, how its possible.
Nikunj, can you please write to them – [email protected], thanks.
I had short sold a script today. And before I could exit the position, intraday trading for that script was stopped for the day. Now what do I do. And how does it affect my position tomorrow.
This is not possible Surya as in the stock getting blocked for intraday during the day. However, if you have shorted and the stock hits a lower circuit, you won’t be exit the same and it will be auctioned. More on this here – https://support.zerodha.com/category/trading-and-markets/margin-leverage-and-product-and-order-types/articles/circuit-limit-hit-intraday-product-type
Hi,
Since I am learning and new to markets, I have a question.
If I have a long term bearish view on NIFTY and want to short it, would I sell current month NIFTY futures or next month NIFTY futures. For example, on 28th Aug’19 I feel like shorting NIFTY would I the short NIFTY Aug’19 Futures which will expire on 29th Aug’19 or the NIFTY Sept’19 futures which has still a month to go unlike NFAug’19 futures which will expire the very next day.
What happens in the above scenario if I short NFAUG’19 futures on 28th Aug’19 which will expire on 29th Aug’19 the very next day. Will the position of futures squared off on expiry ?? and I need to take fresh position in NFSEPT’19 futures.
Thanks.
You should short the Sept futures or you can even buy Put options expiring in Sept, assuming you are comfortable with trading options.
Nice article!!!! I have some queries related to shorting.
Consider stock ‘X’ it’s current market price is 100 and it’s future price is 90 for October series.
I am bearish on this stock and shorted this stock @90
Queries:
1) can I exit this position before expiry
2) If the stock price goes 90 but the future price doesn’t change i.e future price is 90 will I get profit and vice versa?
3) If the stock price doesn’t change but it’s future price change to 80 will I get profit and vice vesa?
1) Yes, you can
2) Its unlikely, the futures price will change
3) Its unlikely that only futures changes, but yes, if that happens you will earn a profit.
i bought TCS one share at price 100 and sold for 110.Like this, i have done five times. All in profit. THen, would my profit be 10*5=50?
Yes, your profits will be 50 minus the applicable charges.
sorry missed one thing. Please in two trading aspects CNC and MIS
MIS is an intraday order type anyway, in this case, even CNC will be considered intraday.
If i short TCS future at say 2080 price in normal market and suppose if it goes higher around 2200 the end of expiry then can i covert the position by buying the entire lot or i have square off the position at expiry with loss only.
If not then how much difference i have to pay to take the delivery.
You can square off the position at any point, Sachin. No need to wait for expiry.
Sir
I want to know that
When we short a srip of stocks how much money do we need in our trading account??
I’m assuming you are talking about shorting in Futures. When you short, margin money gets blocked in your account.
Sir, in Cash market if we want to place a SL in for long delivery order then we need to place a separate sell order right! So, in Future suppose I want to buy 125 shares of ABC FUT shares and some margin money gets blocked. Now, if I want to add SL here do I need to place a separate sell oder of 125 shares of ABC FUT? And if so, does another margin money gets blocked for that order?
No, Deepayan, the margin is not blocked for SL orders.
Dear Team,
Why option writing margin is so high, even for the option strategy – iron condor and butterfly
Depends on the overall risk of the portfolio, Gaurav.
is the profit or loss is in cash settlement(differences between the prices)?
Mostly yes, but then there is physical settlement also, check this – https://support.zerodha.com/category/trading-and-markets/margin-leverage-and-product-and-order-types/articles/policy-on-physical-settlement
Hey Karthik,
The “short delivery” z- connect article mentions a point that, when the client doesn’t have the sufficient funds in the account to buy shares, and if the broker let’s the client buy those shares, then it’s the brokers obligation to pay for the purchase to the exchange, and later the broker can recover the money from the client with intrest, do you think a similar option is available for the client to sell shares that are not in client’s account and when the exchange wants those shares the broker delivers these to the exchange on behalf of the client and the client can then buy back these shares for the broker later on, and also pay an interest
Nope, the closest though for shorting stocks overnight is the securities lending and borrowing mechanism (SLBM), check this – https://www.nseindia.com/content/slbs/slbs_faqs2010.pdf
Got it
Hi, thank you for the wonderful article.
Can I hedge Future with options in Zerodha platform? For example, am buying current month future of particular stock and selling the same month mid out of money call option (OTM CE) for the same stock. So that i can be benefited less margin as well as theta.
Yes, you do get some margin benefit for the combined position. You can check the exact details here – https://zerodha.com/margin-calculator/SPAN/ and yes, the position will be hedged as well. The extent of the hedge can be measured by adding up the deltas. For example, futures delta is 1, and if you CE has a delta of 0.4, then the overall position is =-0.4= 0.6 delta, so you are slightly hedged.
Is there any way we can calculate total short positions in a stock?
Nope, that won’t be possible. However, you can associate the volume and price to get a sense of how weak or strong the market is, check this chapter – https://zerodha.com/varsity/chapter/volumes/
I tried to Square off my position today at 3.15, but my order went into Put order request received.
What does this mean.
And it did not went thru’ now my margin in locked. and i do not have any idea what happned to my order. Please help.
Rahul, were you MIS long? I’d suggest you speak to the Support desk for this. They will figure the exact way in which you got affected and help you resolve.
On 18th march, i have shorted bajajfinserv and maruti under MIS position but did not squared off in intraday due to order pending issue. Now, both sell position goes into settlement at exchange. Let’s take scenario, if both stock increases by 20% in T+3 days then i will be in huge loss. Can i buy both stocks in CNC today to minimize impact of stock price change in T+3 days?….Please reply on priority. Thanks
The auction for that day’s sell will happen today. Plus by buying you are making an assumption that the markets are going to go up. What if they go down?
You’ll make an additional loss?
Hi,
I understood the concept little bit confused in App operation as I am a beginner here.
When I start to sell a share in intraday, I saw an option of limit, when I click on limit, price option enables.
My query is what that price option refers for? Suppose if the share price is ₹100.
And what is difference between Market and Limit options?
I’d suggest you look at this – https://zerodha.com/varsity/chapter/the-trading-terminal/
Thanks Karthik, Even if share price goes down then short sell delivery will be bought on lower price then it won’t equalize position i bought in delivery. Do you mean if i earned profit from short sell then it won’t come to me and will go to “investor protection fund”. Can’t i claim that profit(if happen) from “investor protection fund”.
I request to kamath sir /karthik sir ,
your zerodha varsity is on the best for learnig about stock market. Some people’s, students, villager’s want to learn from you, so i want request to you to make zerodha (varsity, all modules ) in marathi.Those who do not understand English can understand it in their own language.
We are working on making it available in Hindi for now. We will probably do regional languages at a later stage.
If we do short sell in CNC then we will charged DP Charges?
You cannot short sell in CNC.
I have holdings then?
Hi Karthik Sir, If I want to short Nifty Futures Apr 2020, how to do it in Zerodha Trading Platform? F2 key is not working for me. If I want to do it for many days ( Say 1 week) and I want to fix Stoploss price and Target Price How to do it? and when should I buy Nifty Futures.
You first need to ensure that the F7O segment is activated for you. Are you using Kite, if no, I’d suggest you do. To carry forward the position, then you’ll have to use NRML and not MIS.
HI,
Want to join Zerodha varsity. I am current user of Zerodha. However while trying to register, I get a msg that login is not allowed now.
What is the reason?
No need to register. You can start reading and asking queries without any sort of registration.
Hi sir, is shorting in spot market and TCS Stock in spot market (for which it takes 2 days waiting period for money to be added to dmat account ( the artical you written on leverage, remember?)) SAME?
And, does leverage applicable to the shorting in spot market ?
Bala, you cannot short in the spot market and carry it forward overnight. You can do that only with futures.
I had shorted IRCTC for 944 on March 30. Since then, it has been on UC. I have placed GTC buy order. No luck till now. Currently, it is at 1137. Am I staring at a nightmare? It looks like it will stay on UC for a while. …
i have a doubt if i have only 500 rupees in my zerodha account and short hindunilvr(value = 2000) and buy it for 1995 i get 5 rupees profit or buy it for 2005 i get 5 rupees loss but can i short a stock that is way above my account balance?….And my second doubt is what will happen if i lost more then 500 rupees that is greater than my account balance … hindunilvr(value = 2600 here i lost 600 rupees) now what will happen?…..
Yes, you can as long you execute the order under MIS, where you can get leverage over and above your account balance.
Hi,
Can i short sell shares, which i already owned in my demat account.
You can sell them from DEMAT. Its not a short though.
Hi,
I have 100 shares of ABC at the price of 1000 each in My DEMAT account.
My question here is. If I sell all shares at 1500 and buy them at 1400 on the same day. will it be considered as short sell? will the profit be credited
And also, what happens to my shares in the DEMAT account. will it remain 1000 each or it becomes 1450 each?
If it is executed on the same day, then it is considered as an intraday trade. Check this – https://support.zerodha.com/category/console/reports/articles/buy-average-holding-intraday
correction in last line
And also, what happens to my shares in the DEMAT account. will it remain 1000 each or it becomes 1400 each?
hello karthik ,
i have one doubt
i have short sold ABC at 2292 , unfortunately price goes up.
(i have same ABC share brought at 2328 , few days ago.)
Now wen i tried to convert the position of this SHORT sell MIS trade to CNC- IT GOT CONVERTED.-
1.was does this mean ? lets say LTP- 2302 at present.
2. wiLL ABC share from demat will be sold – if yes eat eat price ? or will my CONCERTED CNC wil be squared off at the end of the day by RMS ?
3, In same senario suppose price goes to 2342 and now i sold my CNC SHARE (i have short sold the abc at 2292 already as MIS).
kindly answer.
thanks.
1) This means that the shares from your DEMAT got sold
2) Yes, you can check the exact price from the contract note
3) If you convert then shares will go from your DEMAT
Good mrg 13th april – brought X shares(70) for 1503.(14th holiday.)
15th april – sold 70 shares of x at 1543.
after some time same day – brought 50 shares of X at 1546.
now in my P & L it shows.
x shares 70 buy avg (1536)- sell avg (1543)- profit 465(released)
x shares 50 buy avg(1503) – holding.
why is it tat the 70 stocks i sold the buy avg is 1536 ? it should be 1503, and buying avg of 50 stocks is 1536.
hoping for reply.
Works on a FIFO basis. Suggest you touch base with the support desk for this, Ankit.
Can i short a stock which is already in my portfolio?
If yes then can i hold the short position overnight or longer?
You can short and carry forward, as long as you are doing that in the derivative segment. Short EQ positions can be kept only on an intraday basis.
sir,if i buy stocks in equity intraday with normal order but i see price is going against me so if i wish to carry forward next day to avoid loss.how can i do it?
The question simple is how can convert my normal order intraday to next day
please reply me regards,Thank you
Asif, by normal order I guess you are talking about CNC and not MIS. If so, then if you dont sell it, it will get bought for delivery. However, if you had placed an MIS, then you could convert it into CNC by doing a ‘Position Conversion’, check this – https://support.zerodha.com/category/trading-and-markets/margin-leverage-and-product-and-order-types/articles/how-to-convert-mis-to-cnc-nrml-and-vice-versa
karthik
you replied to me on 20th april, 3:45 pm.
if it works on FIFO basis , then my stocks with 1503 should have been sold and not 1536, which i purchased after i sold 1503.
the console did a mistake,
Nope, I’d suggest you speak to the support desk. They will help you with this.
A scenario: I own 10 shares of Nestle. I decide to enter fresh short position for Nestle but don’t want to squareoff my position.
Since I have the shares, can I deliver earlier for short position, while keeping my original short position open for next day ?
You can open a fresh short and square it off the same day. This can be done even without owning the shares.
Entering a short position: Can I enter a short position by placing different buy and sell order simultaneously ?
viz. at 10:00 AM I place two orders simultaneously:
a) Sell 10@12000 and,
b) Buy 10@10000.
In case this is possible, does my position automatically gets squared off once both orders are executed ?
These positions will net off each other, but since the sell quantity is more, you will be left with 2000 short.
Sir,
For calculating margin for shorting stocks in spot market, you have suggest to use SPAN calculator. I accessed Zerodha website, went to margin calculator, then went to Equity segment. It showed a list of scripts with MIS and CNC multiplier:
Q1: Does ‘5x’ multiplier means 5x leverage and 20% margin?
Q2: When I clicked on ‘calculate’, it showed how many shares can be bought using multiplier. Does that mean we can use leverage for stocks in spot also?
Q3: Which is better ‘shorting in equity Futures or Shorting in stocks in spot (in case of Intraday Trading)?
1) Yes
2) Yes, but for intraday only
3) Depends on your time period. If you want to hold the short position for 2-3 days then you have no option but to short the futures.
Sir,
I would like to rephrase my 3rd question from my previous post. Suppose i want to do Intraday trading and i want to do shorting. I have 2 options either i short futures or i short stocks in spot market. In that case which is better? Because we can use leverage in both the options for intraday.
Thanks.
It does not matter actually, but I’d probably stick to futures.
Hi Sir,
Just to confirm the margin requirement for shorting a stock in spot market is same as in futures market?
About the same or lower, Abhishek. YOu can check the margin calculator, I’ve shared the link in my previous comment.
Hi sir,
Suppose I buy 1 lot of TCS (125 shares ,each Rs.100) and don’t square off by the expiry date,then will my demat account post expiry will have 125 shares of TCS & what will be the amount that is deducted from my account?
Yes, but for that, you need to have sufficient margin to take delivery.
No Rohit, don’t do that. Square off before cut off date otherwise you will incur heavy charges and taxes to take delivery even if you have sufficient balance in your account.
Karthik : Please confirm that Zerodha charges 0.25% on total turnover for physical settlement and additionally there will be 0.1% STT apart from other charges & taxes.
Best Practice is to
1) Always maintain margin in your account & square off before expiry.
2) If you want to buy shares for long term, buy it from Spot market using CNC (Cash and carry) option.
Happy learning !!!
Yes, please check this post – https://zerodha.com/z-connect/queries/policy-on-settlement-of-compulsory-delivery-derivative-contracts-update-oct-2019
Dear Sir,
Shorting in spot market is strictly available on Intra-day basis and you told the concept of “Short Delivery” for that. Then, how is shorting is allowed to carry on multiple day basis in Futures market. Isn’t the same delivery obligation applicable in Futures Market?
No, in futures you can carry forward the position overnight.
Hi,
i have 70 shares of ABC company which i am holding since long time in my demat account. Now i want to lose these shares gradually as i am not making any profit and currently in loss.
Can i short these shares in Spot market and carry forward to next day (because i already have these share in demat) and suppose next day also the prices continue to fall and i decide to square-off (buy it) next day.
would the exchange allow me to do it?
Can i short sell the shares which i already have in my demat and can deliver the share next day?
Would the exchange put a penalty on me?
No, you cannot short in the spot market, you can though in the futures market.
I am new to trading via short selling. Okay, I short sold 600 shares of ABC using MIS option. Now, do I have to place buy using MIS or CNC to close my position? Or, should i wait for MIS square off?
Buy MIS before 3:20 is what you need to do.
Dear Sir,
Can I get short interest details from zerodha or from any other site ??
Short interest details? I’m not sure what this means. Can you please share more context. Thanks.
Sir,
Can I shortsell by using AMO order.
Looking for your early reply.
Thanks,
Yes, check this – https://support.zerodha.com/category/trading-and-markets/kite-web-and-mobile/articles/what-is-amo-and-when-can-we-place-it
Hi Karthik,
Just a doubt – The price of Futures is derived from an underlying asset ( Equity, Commodity, etc). Then while going in for a long or short position on a trade, should I consider the chart patterns of the futures itself or the underlying stock/ commodity from which it derives its value?
Thanks in Advance.
I’d suggest you look at the chart of the underlying, Sharan.
helo karthik sir
A small dought Please correct me if i am wrong
SIR, when we sell something first(say stock,index) will the broker,system(rms) book the margins as soon as the order is placed, i am asking these bez we are selling a particular stock as the broker[rms] only will know that we are shorting only at end of markets when the markets close, and when we square off by my self by 3:30 what about the margins and when it get cut,book from the trading terminal\account and if its a profitable trade who does P\L comes to my trading account
sorry sir if i am wrong please correct me
thank you
Regards
Kiran
You need similar margins for both buy and sell futures. The margins will be released when you square off the trade.
Hi,
I sold two lots of nifty fut jun today. Could somebody pleasse help me, will it be carried forward for next day or not.
Thanks,
Syam
Karthik Rangappa says:
May 16, 2020 at 9:13 am
Short interest details? I’m not sure what this means. Can you please share more context. Thanks.
Dear sir,
short Interest ratio is a simple formula that divides the number of shares short in a stock by the stock’s average daily trading volume. Simply put, it can help an investor very quickly find out if a stock is heavily shorted or not shorted versus its average daily trading volume.
If I get the ratio, as a big trader in zerodha, will help to analyse the short covering % of a share in a day and balace short % to be covered in a month.
Ah ok. But how do you get the short data? This is not published anywhere.
Sir,
I am New to futures trading. To be on safe side, first I want to buy a lot of some company’x’ in cash and I keep them in my demat account. Then I enter futures trading and sell that lot for a small premium may be 4-5% more price. In this strategy, even if the price goes up beyond my selling price, I can easily honour the commitment by selling the shares in my demat account. Will this strategy really works? In these trades, I may not be getting huge profits, but my losses are always zero. I am having 10 lakhs capital to purchase the lot initially with cash. Please answer.
Its a safe strategy, your P&L will be limited.
Hello Sir,
1. I wanted to know can a person short sell ( Nifty / Bank Nifty ) in carry forward n how its calculated, is there any interest charged on it.
Yes, you can short in the derivatives market.
Hi Karthik,
Excellent job done in detailing and making everyone understand the concept.
One quick question in shortselling. Can we shortsell a particular stock even though we have the same stock in our account and close the open positions without having to do anything with the original stock in the account.
Yes, you can. If you are shorting in the cash market, ensure you buy back the same day. You can carry forward the position overnight in the futures market.
tried shorting first time but could not place order with stop loss. system said “trigger price for stoploss sell orders should be lower than the last traded price. Try limit order to sell at a higher price”
As above, in short selling, SL should be higher than order price. how can i place this sell order with stop loss?
I think you may have mixed up the orders. The trigger price should be lower than the LTP and higher than the SL.
My question is: What happens if I short a stock at the lower price and than suddenly that stock goes up and reaches the circuit than technically there will be no seller than what will happen with my short position if the stock does not in the futures market.
Ah, in that case, the position will get stuck and you won’t be able to get out of your position easily.
Hi,
Two questions-
1. You mentioned scenario about short delivery where trader fails to square off and charges would be as much as 20% penalty. But in my case I didn’t square off my shorted stocks yesterday and Zerodha automatically squared it at 3.20 PM. Is this expected scenario? Are there any extra charges here?
2. Also I could see there is limit on which stocks which I can short depending on my fund balance. How exactly will fund balance limit my shorting? (For eg. I had fund balance of 11000 and when I tried to short DMART ( price 2320) for 10 shares, it failed saying insufficient balance.)
1) If you’ve placed a MIS/BO/CO order then the RMS squares off the trade by 3:20 PM, however, the onus is on you to ensure that the trade is squared off.
2) YOu need to reduce the quantity. Did you have any other pending orders in the system? You can check the purchasing power here of the cash balance here – https://zerodha.com/margin-calculator/Equity/
As per purchasing power calculation I can buy 51 DMART shares with 11K fund balance. Still it is not clear why my order was declined saying insufficient fund balance. There were no pending orders and all orders for very less compared to the purchasing power of MIS stocks.
Shashank, that is unusual. It should have gone through if this was a MIS trade. Are you sure you placed MIS and not CNC?
Hi Kartik,
A basic query pertaining to futures.
Assuming that I follow an “always on” strategy and at any given point of time I am either long or short on a stock. Can you explain how this can be carried out in order terms?
Example:-
I take a long position in ABC stock today and decide to go short on ABC tomorrow and then again decide to go long on ABC the day after.
Today – Buy ABC@x
Tomorrow – Sell ABC @y and Short ABC @ Z
Day After – Exit ABC short position @ x1 and Buy ABC @ y2
Is my above understanding correct? I am interested in understanding the various specific orders that need to be placed to achieve the objective. Any order types that simultaneously switch from “long to short” or “short to long”?
Thanks in advance
K . Srikanth
Srikanth, you can easily do this with futures. I’d suggest you avoid spot transactions for this as it may get complicated with the settlement process.
Hi Karthik
I have a confusion around setting up a limit order while shorting a trade. Recently i placed an limit order at a price below the current price. However, this order got executed instantly. This was 2nd time it happened with me, first time i thought it must have been something wrong put in at my end however, this time i was completely sure of values i had entered & options i had selected. Can you help me understand to effectively place Limit Order for shorting a stock if the price goes to specified price which is below the current market price?
Thanks in Advance.
Regards
Jitesh
Lets say you were trying to short a stock @ 100, when the same was trading @ 102. The system gives price priority, meaning it knows you want to short at 100, but 102 is a better price available in the market, hence it will immediately go through (like a market order). So you may end up shorting at any price between 100 and 102, which is a better price than 100.
If you want to short at 100, when its at 102, then set SL limit sell order instead of a limit order itself.
Hi Karthik
Thanks for the response. Just one more clarity needed, if i still want to short at 100 when price is at 102 then you said to set SL Limit order. By “SL Limit order” you refer to SL-M or SL order or is it that either of these two would work?
Thanks
Jitesh
SL order with a trigger price.
In continuation to above query, can i also use BO or CO type to execute a trade where my entry price choice is lower than current market price
Thanks
Jitesh
Yes, you can.
Can I short sell same stock (say HUL) with one broker (say Zerodha) and buy with another broker?
if yes, what precaution can be taken or risk be minimized/
Yes, you can. But why would you want to do that? You can do with the same broker with cash and futures.
Thankyou for replying and suggesting me. Why i asked this question was because of the following situation in which i was caught and didn’t know what to do. On 21-July, i purchased Britannia Future at 3914 with a bullish view, but the stock kept going downward for next 2 days and went out of my risk capacity. I was looking for shorting but didn’t knew how to do. So i went through this article but couldn’t find solution as this article didn’t tell about ” how to short when you already possess the stock”. Finding no solution, when market opened gap up on 23-July i sold Britannia futures at 3874 and booked losses. But I was able to cover my losses by purchasing 50 Bank Nifty futures same day as it as it went up more than 200 points.
Whatever trading i have learnt is through your Varsity and sometimes people who are new to trading are caught on wrong side.
I get it, Mahesh. Also thanks for highlighting this, maybe I will add this chapter to Varsity 🙂
Hi, Tried to do a short selling for Rossari Biotech today (24 July 2020) considering the market might be bearish. But Zerodha did not provide Margin for this MIS order. Please advice.
Hii, i want to know if we do short selling,is there is some percentage of diff. compaines that the p&l would be in that percentage . Like do we get more p&l if we do short selling
No, not really. The P&L depends on your strategy and the extent to which it works in your favor.
Can I short against the box to hedge myself using zerodha.
Kindly help
Yeah, you can.
My query is
at 1000 hrs i did shorting of ABC Scrip QTY 100 Price Rs 500.
At 1100 hrs ABC Scrip price is Rs 200 , now i put new buy order in CNC of QTY 150 and same is executed.
Now how the system will consider the transaction, will it close my short position and i left with 50 stocks in my demat or will i credited with 150 stocks and short position will get square off automatically by 1510-1515 hrs.
MIS will be squared off by EOD and 150 buy will go through.
Can you please make the font colour of the paragraphs more darker? The current colour of the fonts is causing a bit of stress in the eyes.
Sure, will pass the feedback to the team.
Sir, how many times can i short sell in a day..??
YOU can shot any number of times, no restriction on that.
Dear Sir
As you said if I short a future for a particular stock, margin is same. But if the price start moving up and has the unlimited potential say (100 to 800), Ain’t I exposed to unlimited risk and how does the exchange make sure that doesn’t happen?
I would appreciate your efforts in this regard.
Please answer my query.
Margins too move in the same way proportions right?
would you care to explain…?
Thing is the stock won’t move from 100 to 800 in one step, it transitions tick by tick. So when the price moves higher, so does the margins. When the margins increase, you need to ensure you have sufficient margins to continue holding the position. If you don’t have enough, then your position will be closed.
I understood it completely now. Thank you Sir. I really appreciate your effort on this 🙂
Happy to note that, Prashanth. Good luck.
Very informative to understand basics of future trading
Happy reading!
What is target and what is significance of target for long and sort.
what is trailing stop loss
Target is the price at which you want to close the trade and pocket the profit. Trailing stop loss is a technique wherein you keep moving the SL and target price as the stock moves in the direction of your trade.
What happens in intraday trade if there is an upper or lower circuit?
The stocks stay there till a trade occurs to release the price imbalance.
i need to know how to place a limit buy order in zerodha kite , to exit a short future trade
Do check this – https://support.zerodha.com/category/trading-and-markets/margin-leverage-and-product-and-order-types/articles/what-are-limit-and-market-orders
Hii sir,
Sir, if we short a trade with a stoploss and target, so when the target or stoploss will hit, “Will the shares but automatically?”
Thankuuu!
Depends on the order type. If its BO, it will. Else you will have to place the order manually.
What are the charges for short selling?
Brokerage + applicable charges listed here – https://zerodha.com/charges
My profit money is not coming in my account, Sir, please solve it and more money is being cut off from my account
Sahil, please call the support for this. They will explain your ledger for you.
ABOVE EXPLANATION WITH EXAMPLE IS EXCELLENT IT WOULD HAVE BEEN MORE USEFUL IF TRANSACTION METHOD IN ZERODHA PORTAL SHOWN (E.I HOW TO PLACE SELL , BUY , STOPLOSS ENTRY IN PORTAL)
Noted, we will work on this.
Dear sir,
i have a question on Future short sale (NRML),
today as in 6th of Nov i have done a short sale by selecting NRML for Bajafinance with 3715 and @ 2pm the value or position is negetive 27000, can i have a option to hold this for couple of days (before expiry date which is 26th nov 2020)? ,
please suggest was there any sqare off on daily.. because i have done short sale..
Thanks in advonce
Karthik
Yes, as long as you have the necessary margins to hold the position.
I have a Question on Intraday short selling on Equity.
If I shorted a stock at 100rps and bought 80 quantity.
Now, if the price is 120 and i want to Average the price so again bought 100 more shares for 120.
Now lets say my average is 110. Now stock moved to 130.
Now i am buying 100 more stocks at 130. So average lets say is 120.
Now price is coming down to 100. and I sold now 100 stocks for 100. If you see my average is 120 but current price is 100. So made 20rps profit on each stock. Now left with 200stocks with average price 120.
Now my question is price declined to 80 but will my average still remains the same or it changes to something else.
Can someone please explain how it works.
Thanks!
If i short shares and in intraday it reaches upper circuit. Then What will happen?
Then you cant exit your short, shares will hit the auction.
Thanks 👍👍👍👍👍👍👍👍
Good luck!
Hi Karthik
While the concepts behind shorting are crystal clear , could you please give some clarity on how to do this on Kite ? What all things to be watching , for eg positions/holdings/available funds during the trade duration ? How to square off ?
You have to hit the sell button and sell the futures or stock, just like the way you’d buy a stock. Thats it 🙂
Hello sir, sir in TA module we plan to short near resistance following the checklist confirm.. Can we sell the shares in CNC and hold it till target is hit and buy later on
Yes, you can. Most swing traders do this.
Sir you to have adviced in the chapter not to sell CNC it could lead to short delivery.. I referened to ZConnect we can only sell first when we have shares in DEMAT account and if not it’s out duty to handover the shares back to buyer which if we fail it’s default..
Sir could you please tell me what happens for ex I sell sbin @250 and hold it for 2weeks till the target has achieved 225
Thank you🤗
You mean, you want to short SBIN and hold it for two weeks right? Well, you cannot do this as the system won’t allow you to do that. However, if you want to short, you can with SBIN’s futures.
Yes sir that was my question..I got it..I’m a newbie so I’m asking more questions thank you for clarifying😊
Good luck!
Thanks Karthik so basically what I gather is that once we short sell stocks we need to square off the position by buying an equal number of shares before trading session of the day finishes i.e before 3:30 pm. Even for this shorting we need margin money in our account.
As for shorting on derivatives like Futures, we can carry the short over number of days , provided we have the margin.
Is my understanding correct ?
Also, I am unable to reply on my initial question and your response. Is that restricted in the site ?
Thats correct. You can carry forward the short position in futures but this is not possible with stocks.
I heard that in spot market, you can short sell for multiple days by lending stocks. Is this still valid? If yes then please explain this
Yes, this is called SLB, slightly complicated this is, check this – https://www1.nseindia.com/products/content/equities/slbs/slbs.htm
Ok so if we are bearish about the market and we think the price of a particular stock might go down after 2-3 days, then it is best that we short sell futures of that stock instead of short selling direct stocks by using SLB, correct?
Absolutely.
Can we CNC sell and buyback shares after a few days?
No, this is not allowed.
Sir, will stock fall if there are large number of short positions?
Not exactly.
Ok, thank you for yore response Sir
Happy learning, Arun!
Sir One more pls, how would I know that if IV( implied volatility) of stock or index is high or low? Is there any metric to compare with?do we have any sites/S/W to check and compare?
On easy way to do this is to compare the current volatility with the historical volatility of the stock or index.
We sell then we buy….After buying do we need to again sell it?
No, there is no need to do that.
Please explain the scenario in which i sell from DP- is my hold price the sell price or is it CMP that is considered???
Sell is at the CMP, the P&L is considered from your buy average price.
Sir i know what is short selling
But i want ask you how to short sell and hold positions please how to place a sell order for holding?
You can short and hold from holding, Hiten. You can short and hold a futures position.
Hi Karthik,
How can I trade futures without using the margin.
That is I wanted to use my full money for 1 lot and don’t want to use the leverage. Also I wanted to carry the position for any number of days before the expiry without using leverage. Is there any option for this in Zerodha.
Thank you very much.
In that case, you can buy the shares directly in the spot market.
Thank you very much for replying.
I wanted to buy today and sell tomorrow. Due to the risk involved in spot market for BTST, I was looking for trading in Futures. The leverage is causing more stress in my mind, hence wanted to avoid it.
(I am average in technical analysis but started trading with 5.5lac capital in July 2020. Because of intraday leverage I lost around 15k. But once I started trading in CNC I brought my account to 5.6lac. I am able to decide in a relaxed manner without leverage).
Zerodha customer care person said that the risk with BTST short delivery is a rare event. So please advise me if I can do the BTST for atleast the NIFTY 50, Bank Nifty stocks without worrying about the 20% risk with regard to short delivery.
Yup, that’s right Sriram. risk of short delivery is relatively rare in Nifty 50 and Bank Nifty stocks since these are highly liquid. Btw, do not trade any instrument which causes stress, it is simply not worth it 🙂
Dear Sir,
I just want to know that in case I take short selling in spot am I supposed to have the amount equal to the value of shares I am shorting suppose I want to short the share which is being quoting @Rs 100/- and I wish to short 100 shares how much amount is needed in my dp account , am I supposed to have 10000/- in my account before taking the trade
Thanks
Not really, Mahesh. You only need to have the MIS margins to short the stock.
Thanks for this, but my question is how do i keep the stock for more than a day (not intraday shorting).. take example i want to short PEL but it might go up today but a month later i would want to short.. how can I put that in my portfolio?
Thanks
This is not possible Shivam. The only way to maintain a short position and carry it forward is by shorting in the futures market.
Is there any time limit also for settlement while sorting in delivery?
Yes, all settlements are time bound.
Sir how much money/funds or margin do we have to in our account in order to do the short sale.
Like is there any fixed percentage of margin to be maintained while we do short sale?
Or do we have to hold the full value of the short sale in our account?
Kindly reply to this query sir.
Prateek, check this margin calculator to know the exact margin required – https://zerodha.com/margin-calculator/SPAN/
Sir if I sold some on Feb first in MIS TRADE QUANTITY WAS 820 @171 IF THAT STOCK MOVES TO 194 DAY AFTER AND 213 TO ON 3RD FEB WHAT IS QUANTUM OF PENALITY I MIGHT HAVE BEAR.
At least 10-15% of the value.
Are the brokerage charges, taxes , and all same for short future trade as that of long future trade?
Yup, it is.
What of I have same quantity of that particular stock in my holdings which I am shorting today… Am I still liable to clear it by buying or it will adjusted from my holdings shares.. as the quantity of stocks are same.. (in holdings and in Intraday short)
These are MIS trades, which are intraday order types. Will be cash settled.
Hello Sir,
If someone short on a particular stock and after some time he exist from his position. Does this means a square off or he need to buy the stock of same quantity and then exist from the position?
Can you please correct me.
It means that the person has squared off and has no other obligations.
Hi
So, correct me if I am wrong, You can only short shares on a intraday basis or using F&O. If that’s true, it is not possible to short shares for stocks like Burger King, where Intraday trading is not allowed. So, if am bearish on this stock, seeing it fall consistently, there’s no way I can put my money on it?
Thanks.
If you wish to short shares on an overnight basis, then you will have to look at SLB (securities lending and borrowing) market, it is kind of complicated for now.
I want to know how shorting occurs with the broker? Do we need to deposit some amount in the margin account? If so, how much? Also, what is done with the proceeds? Is it given to the broker as a collateral? All of the proceeds or a part of it? What happens to the collateral? Is it deposited in some risk-free/risk-neutral instrument? Also, does the investor gain something from the deposit of the margin account?
This is the same way you’d go long. The margins are similar to long margins. No, there are no gains (I guess you are talking about interest) on margins.
So, Burger King is not eligible for SLB category. Any other way to short such stocks?
Nope, no other way Rakesh.
will i do shorting in CNC. if yes, please provide the rules to be followed
Nope, you cant.
Hello sir, your articles help us a lot. Still few doubts are always there. Can you clarify.
I bought 250 shares at 140 and another 250 at 130. Average 135
I sold 500 shares at 140. Bought 250 shares on the same share at 139. As per the first in first out rule I should have 250 share of average 130 price. and as I did sell and buy same day I should get shorting of 140-139=1 rs (hence 250rs) as profit. Have I missed anything?
Sir you have written in the article that
“Similar to depositing a margin while initiating a long position, the short position also would require a margin deposit. ”
What does that mean?
Also, how long can you hold the short position in futures market?
Basically one needs margins to either buy or sell futures. Thats what I mean.
Sir,
What are the margin requirements in short selling. Suppose I want to shortsell a scrip to the extent of one Lac. Should I have any balance in my trading ac. If so, how much?
You need to check the margins for each stock. You can use this – https://zerodha.com/margin-calculator/Equity/
Sir, Suppose I am long on a future trade can I set up a stop loss on this long trade by going short on the same underlying. Do both the Long and stop loss sell position have to have the same expiry?
You can use a SL trigger price to place a stop-loss order.
Dear karthik,
Hope you are well. Appreciate if you could kindly clarify the following queries:
1.Which is a better strategy when trading with futures-Keeping a stop loss or hedging with options?
2.In case i want to hedge a future contract with option, what variables should I consider (in terms of strike, greeks etc)? Should I hedge with the option along with the futures contract or hedging mid way is also fine?
3. As an example, if i short futures, is selling a call option a better strategy or buying a put option a better strategy? And same in case of going long-selling put or buying a call?
4. Is it better to trade in future only when there is a clear direction of the trend? If the stock is range bound, will options be a better play?
Regards
Shiv
1) Stop loss
2) To fully hedge a futures position, 2 lots of ATM options are required
3) Buying a put keeping in mind that you’ll have to pay a margin for selling CE. Give preference to buying, unless funds are not a problem to you. Also, the decision to buy an option or sell an option really depends on the current volatility and your expectation of future volatility.
Sorry karthik, question 3 is modified as follows
3. As an example, if i short futures, is buying a call option a better strategy or selling a put option a better strategy? And same in case of going long-buying put or selling a call?
Please do see my previous response. Thanks.
Hi,
Thank you for the great learning series here at Varsity. I would like to point out one type in the HCL M2M table.
02 1982 1975 125 x 7 + 875
The above line should have = sign instead of + sign.
Checking this, thanks Pavan.
Sir, is the taxes are same as intraday trading for shorting?
Yes.
Is shorting possible on ETFs. I tried it on NETFIT it didn’t allow me. Thanks
No, its not possible 🙂
Hello sir, How to calculate short selling profit percentage? is it
1) sell – buy / sell or
2) buy – sell / buy
Which is correct sir?
It is the difference between the buy and sell price (+ve value) divided by buy price. So –
1) Sell-buy/buy in case you are making a profit
2) Buy – sell/buy in case you are making a loss.
Oh god! Now I am confused even more 😅.
For long trade, isn’t it always sell-buy divided buy.
But for short trade why the formula changes according to the profitability of the trade sir.
Oh yes, understood, I did not see your answer properly. Was of the assumption the formula differs from long to short trade.
Good luck!
Just to clarify sir, irrespective of the position type(for both long and short), we are dividing the difference between buy and sell by buy price. That is the pnl percentage is with respective to buy price.
Yes, thats correct. Its always wrt to the buy price.
Sir can I short the call option Monday and buy it on Thursday or any other day before expire. Is it possible
What I mean is can I hold short position of long time options. Is it possible or not ??
Yes, you can. No issues with that.
If we are already holding a particular stock, eg. 50 shares of TCS can we do shorting for TCS?…
Yes, you can. It does not really matter if you have the shares or not.
Hi Karthik, If i place a short sell in Future, will it be square off automatically by end of day or will it be carry forward?
If its MIS, then the position will be auto squared off. Else, carried forward for the next day as long as you have margins.
Why would people short in spot market if shorting in futures is way easier and you can keep it overnight. Am I missing something ??
Ppl short in spot on an intraday basis.
Dear sir i have 50 share of HDFC in my portfolio for last one year and i want to short in HDFC for one day so will it be seperated or it will affect my portfolio. I means If i short ten share so my portfolio will minus my ten share??????
No, when you short, choose MIS, the short trade will be considered an intraday trade and you’d not have to worry about the change in holdings.
Short selling may kitna amount rehna chahiye?
Hello, I have query , I am new to option shorting:
1) I came across this line,
“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.”
What about shorting Nifty option (weekly expiry) overnight? Can I keep position overnight if I have enough margin?
2) brokerage & other charges : are they same or different for taking long position & writing?
1) Yes, since this is a derivative position, there should not be a problem, as long as you know what you are dealing with.
2) No, it’s the same.
Hi Mr. Karthik.
Many times I am observing . Why does option premium prices not get updated timely as per movement in stock underlying value. ? For example XYZ stock price moves from 50 to 90 in 2 minutes. But it’s call option price not moving from 10 to 15 at same time. It moves from 10 to 15 after 10 minute or 20 minute. Or 10 to 12 after XYZ stock reduced from 90 to 70. It creates issue in buying and selling at right time. Pls clarify Sir.
Because the premium should also get traded right? Remember these are also tradable instruments, so unless there are trades placed, the option wont move.
Dear Sir,
I would like to know what happens when we try to do multiple shortings same day.
in a scenario where everytime we buy at lesser price than selling. it is legible?
Yes, you can initiate multiple shorts (in different instruments) simultaneously.
Sir what if a short future is not closed on expiry? Do i need to give both M2M for expiry and delivery of shares
Upon expiry, this will be settled physically.
It’s a great post even donkeys can understand. Made it really interesting also. I felt like reading a story book. Keep it up.
Happy reading, Neeraj!
Hi Karthik, kudos to you for writing up all these aweeesome tutorials. Kudos to you and the team.
There is a typo in Section 8.4 – P/L on day 2 (125 x 7 + 875) should be (125 x 7 = 875)
Thanks! I’ll check this Ashish.
Can I short the stock in swing trading?
In futures yes, not in the spot market.
1. Can you short sell on the ipo listing date?
I dont think so.
Sir, I did short trading for a stock at Rs.100 and it didn’t square off in market time because it reached upper limit which is Rs.111.
Hence, I couldn’t buy that stock and I am not sure what happened to my trade. Could you please explain this scenario as well?
Please check this, Ibrahim – https://support.zerodha.com/category/trading-and-markets/trading-faqs/general/articles/what-is-short-delivery-and-what-are-its-consequences
I am new to trading and basically taking swing trades so far. Recently i tried shorting and made a profit, i sold 400 shares first and later bought them for a lower price. So my question is the shares that i bought later for the reduced price do i own them or do they come to my demat account T+2 day later or i just get the profit from that trade. Please clarify. Can i sell them later again? When the price increases?
No, you dont own them. Remember when you sold and bought back, its as good as buy and sell (but in the opposite direction). The trade is considered complete.
Do we require the funds to short?
Yes, margins are applicable for short positions.
What happens if short sell is initiated inna only buyers zone….
->As there are no shares that are available to square off
The risk of stock hitting the upper circuit and you not able to exit your short is high.
How do i short the stock i already own ?
You can short the futures contract.
Hi Karthik,
I have 100 shares of X held for 50 days. I foresee some bad news for the stock and proceed to sell the stock on a particular morning. However, I see that that the price has hit a resistance level before the end of the day and buy 100 shares of the stock at a lower price on the same day.
1. Am I really shorting here ? Does the holding period change reset to 0 days?
2. If I sell the stock in the morning as MIS product, Will I able to change order type to CNC during the day?
Asking this since shorting can be done only on an intra-day basis..
3. If I sell the stock in the morning as CNC product, I am required to authorize the sell transaction.
When I buy it back as mentioned above, My positions are closed for the day. Does the stock still get debited from my demat account on T+2 days?
Thanks for all the content.
1) 100 shares you sold and bought back, this is considered as an intraday trade and wont really change your position. No, you are not shorting here.
2) Yes, provided you have the stock in your DEMAT. Also, this wont be short, it will be a sale from your demat account
3) No, it will be considered as an intrday trade.
Correction* However, I see that that the price has hit a support level
I figured as such 🙂
I have a question. If I hold shares of a company from a CNC order and then I make a MIS sell order of same or less quantity and then I don’t square off. What will happen? Will I be squared off from my CNC order or not? Also will the answer be same when done before T+2 day
MIS will get squared off, CNC won’t be impacted.
Heartiest Gratitude for such a valuable details regarding shorting.
Thanks, Thakur. Happy learning!
I can’t find the MIS margins column in the margin calculator, also margins show for MIS, NRML, CO in the kite app are the same. I am missing here something or the margins have been scrapped out?
After the new peak margin regulation, margins across MIS and NRML is the same. Check this – https://zerodha.com/z-connect/zerodha/bulletin-latest-at-zerodha/peak-margin-intraday-leverages-2nd-order-effects-dec-1st-2020
Hi,
In the case of a short sell, I wanted to understand the impact on margin money.
So let’s say if I invest in an EQ of INR 100 expecting it to fall at 95.
I sell by paying a margin of 100 (Hypothecially) & buy before the square off. I made a profit of 5, what money will I get after squaring my position?
You will get the profit you made, in this it’s the selling price minus the buy price i.e. 100 – 95 = 5.
I planned on shorting and the margin amount shows way more than the amount that I’d need in my funds..
It comes up with an error of insufficient funds all the time, restricting me from shorting..
Please help
I’d suggest you call the support team for this, they will tell you what the issue is.
sir is it necessary to buy a shorted future before expiry?
for exp . i shorted October usdinr future should i have to buy before expiry or leave it ?
can we face penalty actions if i not buy the future before expiry?
You have an option to either hold or sell before expiry.
What are the charges for Short Selling?
Regular trading charges, nothing extra.
Hello Karthik
I have one doubt…
What if one shorts a stock in cash market and it hits lower circuit on that day…
How can he/she be able to buy back those shares without buyers in the market?
In such kind of situations will the trader be subjected to short delivery situation or since shorting in cash market is purely intraday, will zerodha square off the position on behalf of the trader and protect them from short delivery?
Kindly do clear my doubt
Thank you
If it hits a lower circuit, then unfortunately you will get stuck in the short position. This will get auctioned off in the market. YOu can check this – https://support.zerodha.com/category/trading-and-markets/trading-faqs/general/articles/short-delivery-without-fresh-sellers-auction-market
Sir, very nice presentation, please correct the highlighted red rows and the associated calculatin in the above table.
Hi Karthik,
Thank you for this wonderful article.
I have one question. Might be silly but want to understand this:
Let’s say I have invested in one stock A and hold 10 units of it bought at Rs. 100 making my investment in it as Rs. 1000.
Now let’s say after few month the CMP of A is Rs. 200 and I think it will decline to Rs. 150.
However I still believe that the long term price might be really good and I want to keep my initial 10 stocks as it is and want to short on new units.
Basically I want to short the stock of which I hold some shares but would like to short on new units keeping my original shares as it is.
Is that possible? Or whenever I will attempt to short the shares that I hold, the shares I hold will only get sold?
Best Regards,
Rachana, you can always short in futures or buy options on this stock.
Hello Karthik ,
Wanted to know about long term shorting for a stock not listed in F&O
Eg: TATAELXSI – there’s no F&O allowed in both NSE & BSE.
However if one wanted to profit off of a down move say anytime in the next 6 months, is there no way ?
I understand that equity shorting is intraday only ( and largely / comparitively illiquid I assume ) but then seeing beautiful technical analysis working on : https://www.tradingview.com/x/HQSUqqoY/
it seems odd – this degree of technical correspondence ( also beautiful Elliott waves that I see ! ) was characteristic of highly liquid, traded markets from what I understood (market psychology etc etc ?)
Please do tell if one can short these companies in some other way for the long term or if some market players (HNI or certain legal structures) have access to such methods to short in the long term.
Thanks for help 🙏🙏
Bhaskar, you can use this facility to short and carry forward the position – https://www.nseindia.com/market-data/securities-lending-and-borrowing
Thanks Karthik, but from what I gather, this is very illiquid.
Thanks for help
Good luck, Bhaskar.
Hi There,
Do the institutions, banks, mutual funds have the ability or access to create an overnight short position in equity spot market?
Or the rule only applies to retail traders.
So, if a stock doesn’t have a future derivative.
NO ONE can create an overnight short position?
That means if that stock is falling, people are actually selling & not creating a short position?
One can actually short via the SLB market, check this – https://www.nseindia.com/market-data/securities-lending-and-borrowing
Hi,
What happens if we are unable to buy back the stock which we shorted in intra day, may be there are no one to sell the same at the end of the day. And what would be the practical scenario in this case? Are there any penalties and can u explain a scenario please. That would be helpful to many.
Thank you
If I short a stock intraday at 10am and close of by bying stock at 3pm. Does it mean I have now bought same stock and it will be delivered to my demat account?
No, it means trade is squared off.
I want to “SELL” Banknifty XXX the CMP of it is 110, when i select the sell option with the lot size of 25 it says the required margin is 1140000
I dont understand how this margin is calculated, can someone clarify this
On the other hand if i want to “BUY” the same Banknifty XXX whose CMP is 110 the required margin is 2750 (110*25) which makes sense
When you sell an option, Margins are required just like the way it works for the future. But when you buy an option, only a premium is required. I’d suggest you read the module on options to understand this better.
Thank you very much indeed . Very informative answer for my query and it helped me alot.
Happy learning, Usha!
When a stock is under short covering and we hold that stock whether to hold that stock or sell it ?
That depends on your view on the stock, Ankit.
Hello sir, can we hold short position for more than one day or does it have to be intra-day? if it is possible then how can it be done on Zerodha?
Equity short should be closed the same day. You can carry forward the position overnight in futures though.
How to identify or find out short trades being happening on a particular stock.
How to check open interests in shorting?
Open interest does not give you information on short or long positions, it gives you information only on the number of contracts which are open.
Is there any timeline to square off short positions in futures with NRML 100% margin paid or we can hold them until we want, like we do for long positions in equity cash?
NRML positions can be held overnight, Sanyam. There is no need to square off the position.
Dear Sir,
Can I buy and sell future contract of same month and keep it till expiry. For example: natural gas 28march2022 buy at 324 and sell at 350 and keep it till 28 March trading date being 25 Feb 2022.
No Harsha, that will negate the position.
Suppose I short a stock at Rs. 100 and now it is trading at Rs. 105. Due to intraday obligation, I need to buy back the shares @ Rs. 105, in spite of having a loss of Rs. 5. Now I try to buy back the stock @ Rs. 105 but I am not getting any buyers. Can this happen? If Yes, then shall I be penalized for short delivery?
Yes, this can happen of there is no liquidity and yes, you will be penalised for short delivery.
Can we short future of index or we can do like buying the Index pe before the certain expiry.
Yes, you can Ramu.
I did the short sell with one share selling price is 22 with the 50 quantity and buy it on 21 so I made it 50 rupees profit but when i see my portfolio in very next day the profit is not there and they cut 1.5 rupees also. pls, explain about it.
There are charges for transactions right? That would be deducted. Please see the charge list or use this brokerage calculator – https://zerodha.com/brokerage-calculator/#tab-equities
Can we carry forward nifty futures sell position overnight??
Yes, you can.
Have one question – When we short a stock, is there a risk that we may not find a seller before 3:30? I understand this could be a risk when we trade large quantities but otherwise does it happen that a seller is not available from whom we can buy back the shares shorted. What if we try to square off but don’t find a seller, does the exchange still penalize? This is the only risk I’m worried of.
Yes, that risk does exist. In fact, that is one of the risk, check this – https://support.zerodha.com/category/trading-and-markets/corporate-actions/general/articles/what-is-short-delivery-and-what-are-its-consequences
What is minimum captital required for selling in intraday
There is no standard answer to this, depends on the stock price.
Can you please explain shorting a put with example. Thanks
Please check the options module, I’ve explained it there.
What will happen to my trade If After shorting next day Stock turns 60-80% Up…
What could be my maximum loss ?
Losses can me more than that I having a Money in my trading account ?
Is there any Limit for losses ?
Firstly, when you are short in EQ, you need to square off the position the same day. However, during the day, if the stock hits a circuit, then you cant close the position leading to an auction. More on that here – https://zerodha.com/z-connect/queries/stock-and-fo-queries/consequences-of-short-delivery-nse-bse
what happens when i dont buy back the shorted stocks before the End of the day?
How much do i have to pay as penalty? Please let me know
Check this – https://zerodha.com/z-connect/queries/stock-and-fo-queries/consequences-of-short-delivery-nse-bse
how to place a short sell order with stoploss and target. As the BO has been cancelled now.
I’d suggest you call the customer support desk for this, they will help you with it.
is it possible to prepare margin calculator in excel for my own purpose mostly for index options long term option like(dec2022 or so)?
if yes , can you plz guide me for that material or formulae or so…./
thanks
No, that’s not an easy task 🙂
If I have 2 DMAT accounts, can I take a long position in future in one and short position in the other? I am referring to Nifty monthly future.
You dont need demat for derivative trading. You can do that in two different trading accounts, but you dont really achieve anything of it 🙂
What is meant by ‘short covering’?
To close or square off your short position is called short covering.
In futures market in nrml how long can i short
Girish, at any point you have access to 3 monthly contracts. You can choose from that to trade.
Thanks for responding to my query Karthik.
I only wanted to know if there are any SEBi restrictions on long and short future position in the same contract(Nifty) for the same period…. placed by an individual user. Hope its not an issue?
No, they don’t have. But such a position does not make sense right?
TCS future lot is 150. If i short it and I m in loss at the time of expiry . Can i adjust the shares from my dmat against the shorted shares.
Yes, that’s the essence of physical delivery.
Can I short sell a share which already I have?. (I’m not sure the term ‘short sell’ is applicable here). Example I have 200 share (let’s say – share ‘A’). in a holding price of rupees 100 per share. I assumes that this share will go down and I sell 50 shares today. Can I buy back this 50 shares on the same day when the share price comes down rupees 90 per share, Or it goes up rupees 105 per share.
Sir,
Please explain what js the maximum possible loss during intraday trading.
Suppose I took 10x leverage and incurred loss on that. Will my broker cancel the trade or loss will keep on continuing.
Have explained that here – https://zerodha.com/varsity/chapter/leverage-payoff/
If my short position moves in opposite direction. I will face loss. Can i average by shorting when higher price. Are they similar for indices and stock futures.
You can, but it may not be the best idea to do that.
I am new stock market. I want to gain knowledge about trading. Can you please tell what material to read. Is it available on your site chapter wise?
YOu’ve come to the right place. PLease start reading the content here 🙂
I have a question. What if we short sell, but by end of day there are no sellers to buy back shares from – what should we do in such situations?
Well, in that case, the position will be auctioned for short delivery.
sir i have a doubt how is short covering rallies work.
according to you if we take a short position it should be covered that day. but in this case monday markets are down and tuesday market are high. so peoples discuss tueday market rally because of short covering. if peoples take short position on monday end of the day they cover short positions it means they buy the stocks in that process the stock price will go higher if there is a short covering rally then monday evening should have happened. why its happened on tuesday. in short position there is no carry forward but how the peoples cover their shorts on tuesday. iam a beginner in stock market pls clarify my doubt sir.
You can carry forward short positions using derivatives. So when most people talk about unwinding positions, its mainly about derivative positions.
ok in derivatives has a carry forward ex : monday thousads of peoples shorted nifty [nifty is a derivative therefore has a carry forwdard] . so everyone carried their positions over to the next day . tue morning some gud news came nifty shot up so everyone got scared cover their short positions it took the market even higher . so how its happen nifty can rise and fall only becoz of underlying stocks in this case peoples shorted their position in nifty not in its underlying stock then how can nifty grow.
YOu cant look at one instrument in isolation. You have to look at the overall market 🙂
Hi Karthik Sir,
How short covering makes the market go up next day as people can’t hold the short positions over night ? Many times heard that market rallied because of short covering. I am confused here. If the short positions are in Future or option contracts, how this derivative positions short covering makes the market moves up next day because market can influence the derivative contract but not the derivative contracts moves the market. Please shed some light on this.
Thanks
Satya
So when you cover short futures (which are held overnight), you must buy back the contract. This will lead to futures moving up and or a short while influencing the spot to move. Rallies fueled by Short covering usually don’t sustain for long.
Hi Karthik Sir,
Can the big institutions hold the short positions in stocks over night ?
Thanks
Satya
Yes, they can.
Hi Karthik sir,
Could you please clarify the below query.
If big institutions can hold the stocks short positions over night, where will the buyer get the stocks if the institutions doesn’t cover their position. Will they borrow from other investors and give it to buyer ? How the settlement process works for buyer if institutions hold the short positions in stocks for long time.
Thanks
Satya
There will be some retail float in the market, Satya.
Karthik
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.
This is probably one of the best comments I’ve seen in a while. Science requires knowledge, gambling doesn’t require anything really. The positive will always distinct from negative.
Happy learning and I hope you like the content here on Varsity 🙂
Hi , had a query on Shorting the shares i have in my holdings.
Say i have 1000 shares of say Vodaphone-IDEA and would like to SHORT this & Earn money as i see 1 rupee fluctuation daily up & Down.
Assume the current price is 10 rs for Vodaphone-IDEA share .
I happen to Sell all my 1000 shares for say 10 rs each,
EOD, the Current price is 9 RS.
hence in this situation if i buy back my shares at Rs 9 , then i MAKE a profit of 10000-9000= 1000 rs.
IS this SCENARIO perfectly FINE?
ANY TAX obligations , since i sold my stocks & brought it again. BCOS i beleive this will come under short term gains & i have to pay more TAX.
Are my 1000 shares SAFE in my holding after the SELL-BUY Cycle.
Please advice.
thanks Deepak
The example is fine. By the way, there is no need to have shares in your account to short. Also, if you regularly trade, then the trading activity is considered as a business income. Please talk to your CA about this.
Hi, I had a question – can short contracts be rollovered?
Yes, you can rollover short contracts.
Why there is no STBT facility for t+1 settled stocks.
The systems are not geared to handle the settlement for STBT.
Hi,
Can you help me understand the charges associated with intraday short selling ?
All the charges explained here – https://zerodha.com/charges/#tab-equities
Are there any kinds of restrictions for the institutions (FII/DII) towards shorting in the derivative market(buy pe/ sell ce/ sell futures)? Can they short as much as they want in the derivative market?
Yeah, they can.
Hi Karthik,
How to put a stop loss in futures nrml.I have used the stop loss market but after market close my stop loss also got canceled. I want to know how to put a stop loss for a overnight nrml position?
I’d suggest you call the support desk for this; they will help you. Easier to explain over the phone.
Thank you Karthik for the response however can you share me number of the support desk.
Here you go – 080 4718 1888 or 080 4718 1999.
Thank you Karthik.
Happy learning!
Hi Karthik,
Adani Wilmar (AWL) regularly hits the upper or lower circuit of 5% from last few months. Let’s say I shorted 100 shares of AWL in MIS at 9.16 am and then let’s say it hits the lower circuit by 11.30 am, will I still be allowed you square off my position? If not me then can Zerodha RMS team can square it off? If not both then how will the position be squared off intraday? Will i incur any penalty here for failing to square off?
If you are short, you must buy the shares back to close the position. But if the stock hit lower circuit, then it means no buyers. Hence, it will be difficult for anyone to exit these shares.
Thanks for the reply
So it means it will be a collateral damage for the trader for no mistake of him
Sorry, can you share the context?
How many days can short shares in equity market
You will have to Sq off on the same day. Shorts cannot be carried forward.
How can one short sell the stock if it’s not there in his account. I know you have explained it but still i didn’t got your point.
Aniket, what exactly you are finding it difficult to understand? If you specify, I can help.
The context is – in case of say lower circuit there would be no buyers and so the trader won’t be able to close the position even if they want to. Thus for no mistake of theirs they will be required to give the delivery of shares and also suffer huge penalty for short delivery. This is what I called collateral damage..
Yeah, you can’t help such situations and it is not about mistakes. Remember, circuits are also an outcome of market behavior, just like a stock going up or down. When you trade the market, you are willing taking this risk 🙂
Sure. I think it’s better not to trade the options of such volatile stocks because they are fraught with the risk of circuit on either side
Yes, you need to exercise maximum caution while trading options, AMit.
Is it possible to short for long term in commodities??Or will it get squared off the same day?
If we short in future market , by how many days do we need to square it off?
You can hold it upto the expiry, Sushmitha.
Can we hold both NIFTY future long position and short position simultaneously ?
If you are talking about the same expiry, then no, its not possible as both the positions together nets off the position. But across two different expires, you can.
Hi Sir,
In Equity, shorting can be done only on intraday right?
Thats right, Gokul.
There is a typo mistake in the M2M table above. Would be “=” instead of “+” for the [row Day 2 (P&L column)].
However, many thanks for clarifying short selling in an easy to digest manner.
One question that is spinning in my head, what happens if I keep shorting call option instead of futures for that same stock.
Another query, is there indeed any tricky way to keep shorting for more than a day in spot market. (If anything).
Looking forward to your reply. Thanks in advance.
About the typo, thanks for pointing. Let me check.
About shorting CE instead of shorting Fut, directionally it is the same, but options come with its set of parameters to take care of, such as volatility, decay of time, etc… So if your intention is to benefit directionally, you’re better off shorting futures.
If I make a short sell of stocks, can I adjust those stocks from my demat account?
No, you can’t. Short-selling stocks are only on an intraday basis.
One typo error is there. Please correct.
In section 8.4- 2nd row and 4th column, There has to be = instead of +
Ah noted, thanks.
I have a question, Let’s say Exide industries announced a dividend and the ex dividend date is 19th July, the July contracts of Exide will expire on 27th July. So if We sell / short the futures of Exide before the ex dividend date . And on the record date the dividend amount will be deducted from the price itself. Is it that much easy to make money from this? Or there is a twist in the picture. 🙂
No, since the future prices will be adjusted, so will the buy/sell price of the futures contract. There is no eas money in stock markets.
How to set target like limit order example if i short at 500 how can I place order to square off at 450 ??
The table where you are showing how to short the futures and how M2M is calculated in the second row in place of ‘=’ sign there is ‘+’ sign shown, this may confuse a new user. Please correct
Can you eloborate on how it can be misleading? Will be happy to change.
I wanted to short sell a stock with longer horizon of upto 3 months and i don’t want short sell the futures as their value decays over time and they expire worthless. Also all small cap stocks do not have futures. So is there any way of doing that? Kindly explain
This is the only option – https://www.nseindia.com/market-data/securities-lending-and-borrowing
Nice article, There is repeated `Trade Type` in trade table.
Let me check, thank you 🙂
125 x 7 + 875. Please update this. I think there is typo in this
Checking, will do.
where the triger price to be enter in short sell transaction while selling or buying
The order form itself, Shubhash.
First of all thanks sir,for providing such valuable content.
I have a doubt -How the problem of “short delivery” is solved in future market? As when i sell a future stock then it would be bought by someone and buyer’s demat account credited stocks in (T + 1) wrking days.
Futures contract is tradable (both intrday and overnight) in both ways. There is no concept of delivery in futures until the contract expires. Hence the ease of shorting.
Can you explain the difference between short sale and naked short sale. Does entering into short delivery leads to calling the trade as short sale?
Do provide your views on the same.
Both are same, what you mean instead is the difference between a hedged short and a naked short.
1) Naked short is when you sell first and buy pack later with an intent of making a profit when the price falls. If the position goes against you i.e if the price increases, you make a loss.
2) In a hedged short, you do the same thing, but have an opposing position in case the price moves against you. The idea is to offset the losses from short position with the gains from long position.
Also as per Investopedia Definition the difference between Short sell and naked short sell is due to the borrowing of the share. In normal short sell you borrow and then short, however, in naked you don’t own-don’t borrow but still short the same.
The above definition brings in a series of question in my mind as follows:
1) The entire concept of short selling is based on borrowing the shares first, entering into a trade and then repaying the borrowed shares. However, the definition of naked short sell breaches the whole main framework on which shorting is based. If the definition of naked short sell were to be true, then how does the trade gets executed with ought borrowing the shares.
PS: I don’t think borrowing is the main differentiating factor between the two.
Also here i am referring to short selling in spot market on intraday basis.
2) If we assume the trade still gets executed, then is not true that the trade will never get settled as the stocks are neither borrowed nor owned. The order will always be open.
3)If such kind of trade exists where you neither own- nor borrow, then is it true to call it a theft. This is the same reason why you will not square off the position as the stocks are stole. Why would a thief repay the stocks by settling the trade which he stole.
Kindly put some light on the same.
Thanks in advance.
Paras, I’d suggest you read this about shorting here – https://zerodha.com/varsity/chapter/commonly-used-jargons/.
The difference is in the settlement process. All trades are settled at the end of the day basis. If by end of the day, you dont have a short position (in equity) open, then there is nothing to settle right? Thats the reason why short positions are closed on an intrday basis.
Hiii Sir,
I wanted to know is there any way to hedge naked short futures?
Thanks.
Yes, by buying a call 🙂
So let’s say we don’t have the stock we sell it ok let’s say got it selled for 100. We expect to hit 50. Ok . Ok now let’s say price fells and we but it back but that’s like money from thin year. At the end we don’t have any stock just the profit.
Yup, thats how shorting works. You are taking a risk, and there is a reward for it if your risk pays off.
suppose i dont own ITC share, and watch a negative downfall within a week, so can i sell those share in delivery option in zerodha, without doing it on intraday perspective, but in longterm perspective
Ah no, not in equity, but you can in futures or options.
Hi,
I would like to know if I can short in the spot market and carry forward it for overnight till next day??
Nope, you cant do that. You will have to square off the position the same day.
Can i sell shares in longterm (CNC) and buy those shares after some days.
Yes, you can. Why not.
On 13th MAY 2024 i short selled 1000 stock of DYCL @489₹ each. After few minutes the stock hit UPPER CIRCUIT and i am unable to close my position. Today on 14th MAY 2024 the stock goes for auction and as per calculation the stocks are settled at 624₹ each. I made a huge loss.
So, my earnest request to all that please use STOPLOSS During a short Sell.
Sorry to hear that, but yes, using stoploss is a no brainer and everyone should do that.
Hi Karthik,
Can you help me understand, when I initiate shorting on a stock in spot market why won’t that be available for delivery at the end of market hours if I am not buying it back?
Thank you for this goldmine of content nevertheless 🙂
Delivery means that you have to give the stock (in the context of short), how will you fulfill that obligation?
hi karthick sir…. If shorting is allowed in cash market only on intraday , then how should i interpret the falling market. Is the market falling because of profit booking or someone shorting the market on intraday.? if we cant short positionally means then the pullback in downtrend is actual buying not short covering sir? Kindly explain sir….
You can sell equities, short intrday, short futures, buy puts, sell calls – so many ways to express short positions 🙂
Will short buildip and short covering on derivative market affect the equity market sir?
Yes, there will be short term implications.
Understood now. I was assuming shorting can be initiated only if I own the stocks.
Thanks!
Cool. Good luck!
Hi Karthik,
I’m still not very clear in the sense of the capital required to get into a short trade in the spot market.
Assuming the example of Reliance Industries Limited shares trading at 2950 and i’m shorting it with a target price of 2900. So the capital will be used only when i am buying back those shares and not when I am initiating the position?
For example in a long trade, i would need CMP*(Quantity) to initiate the trade, what is it in the case of a short trade?
You need to have margin funds, Vikhas when you take this trade and not really all the funds i.e. CMP * Qty. You can use this to figure the exact amount require https://zerodha.com/margin-calculator/SPAN/
Hi karthick sir,
are institutions allowed to short the cash market positionally?? or this rule (shorting cash market is allowed only on intraday) applicable for everyone? I read about securities lending and borrowing scheme valid for 12 months. what is it sir?
Yes, they can (even you can), via the SLB segment.
Well Done!! Initially i was doubtful about executing a short sell transaction, but after reading this article i think i am ready. The language was so simple and every line to the point. Really appreciate the easy explanations with examples!
Happy learning and good luck, Nidhi 🙂
Sir, sorry to ask you more questions. Intraday short selling in cash market is different from SLB segment? because i am not able to short sell in cash market more than a day. But SLB scheme says i can hold for upto the contract time maximum of 12 months. Kindly explain sir.
Yes, SLB is different compared to intrday short.
Hi Sir,
As I am beginner in the stock market, could you please explain when we square off the shorting, did we get the shares in our Demat account ? As I am unable to understand if we don’t have shares in our account how we can sell then or short them ?
No Mahendra, there is no delivery when you square off the short position. It is just like closing a long position.
Hi sir,
Kindly let me know what is the margin money we need keep in the account to if future buy long goes loss day by day.
Siva, you can check this – https://zerodha.com/margin-calculator/SPAN/
How short selling charges is calculated. I have Rs.30000 fund balance.short sell 500 shares at price Rs. 170.00 and book profit 165.00. How much will be my net profit after all charges and how it will be calculated??
YOur profit will be 5, multiples by the number of shares.
Saar why ola electric stock price declining saar?
Check their fundamentals 🙂