What is Cover order? How to Use Cover Order? Benefits of Cover Order?

How to use Cover Order in Stock Market?

Does ProStocks Provide Cover Order?

Cover Order is Intraday or Carry Forward or Delivery order?

Cover_Order

Introduction

A Cover Order (CO) is two leg orders where first leg of the order creates position and second leg of the order is position off setting/closing stop loss order. As name suggest second leg stop loss order give cover or protection to losses which may arise from first leg order, hence called Cover Order (CO). Cover Order has inbuilt protection. Cover Order is synthetic order is not supported by Exchange API and is created by combining one normal or regular order with one stop loss order, hence synthetic order.

Benefits of Cover Orders

Cover Order allows you to simultaneously place position creating order and corresponding position closing order, in one go.

Cover Orders help you limit any potential losses that could be incurred on a position.

Limited Risk/loss and Maximum Profit: Cover Orders minimize downside risks and provide effective control over risk management. Since there is always a second leg stop loss corresponding to first leg trade/position, Cover Order help users trade in a disciplined manner.

In Nutshell, Cover Order reduces downside risk without imposing any limits on their returns.

How Does a Cover Order Work?

  • A Cover Order (CO) is a two legged order. First leg can be Buy or Sale with compulsory corresponding stop loss order in the opposite direction as second leg of the order.
  • First leg is also known or referred as parent order and second leg as child order.
  • Most Stock Broker if they allow CO, The first entry order will always be a market order. However at ProStocks, first leg which will create position can be limit or market or even stop loss order, which is superior to CO where first leg can only be market order.
  • Stop loss order will sit in the order book as a Stop-Loss trigger pending order; once last traded price reaches or crosses the trigger price, it gets triggered (Converted) as a normal market order (from SLM) or normal limit order (from SLL). At ProStocks, second leg is always SLM and first leg if placed as stop loss position creator order, than SLL.
  • The trigger price range will be defined daily and the client must place the stop loss order within the specified range. For example, suppose Infosys is trading at Rs. 1700/- and daily price range (also known as circuit limit) for the day is Rs 1530/- to Rs 1870/-. In this case the client can specify the Stop Loss order between the price ranges of Rs.1530/- to 1870/- as the trigger price. Clients are expected to keep sufficient gap from lower and upper limit to ensure that order gets traded.
  • Once first leg of the Cover Order (position creator order / parent order) gets traded, the client will not have the ability to cancel the second leg (child) of Cover Order. Second leg (position closing / child) order can be modified but cannot be cancelled.
  • Cover Order is presently available as intraday product. Intraday position will be auto squared-off by our system if you do not square them off within the stipulated timings on best efforts basis.
  • If second leg of the cover order is rejected / cancelled for any reason, please regenerate second leg or you will have to reach our dealing desk over the phone to square off the position or regenerate the second leg. Please get in touch with us on our helpline at +91-22-62434343 and press 1 for dealing from 9 AM to 5 PM on working days.
  • Cover Order are available for Equity, Equity Future & Option and Currency Future & option.
  • ProStocks soon intent to introduce Cover Order as Delivery (For Equity segment) and Carry Forward (for Derivatives segment) product.

How to place Cover Order

Buy Cover Order where First Leg is Normal Order

E.g. Reliance current price is Rs 105 and you intend to buy 100 shares @ Rs 100/- per share and to protect yourself from downside, you want to keep a stop loss of Rs 5.

To place Buy Cover Order go to order entry window and select Cover. Then you need to give the Quantity as 100, Price as 100 and Stop Price as 5.

In Stop Price you need to put the difference price between limit price per share and trigger price per share.

So as on when Reliance Price falls to Rs 100 your Buy Order will get traded and a Sell Stop Loss Market Order (SLM) will get placed where price is Market and Trigger is 95. Remember your actual trade may be lower than Rs 95 (as this is SLM) as trigger will happen when last traded price will come to Rs 95 and trade will happen at best possible market rate.

Buy_Cover_Order_Where_First_Leg_is_Normal_Order


Buy Cover Order with first leg is also Stop Loss order

E.g. Reliance current price is Rs 100 and you intend to buy 100 shares if price goes to Rs 110/- per share and to protect yourself from downside, you want to keep a stop loss of Rs 5.

To place Buy Cover Order with First Leg is Stop Loss, go to order entry window and select Cover and then select SL. You need to give the Quantity as 100, Price as 110, Stop Price as 5 and First Leg Trigger Price as 109.25.

So as and when Reliance Price goes to Rs 109.25, your Buy SL Order will get triggered with limit price of Rs 110. Assume 100 shares got bought @ Rs 109.5. Now Sale Stop Loss Market Order (SLM) will get placed where price is Market and Trigger is 104.5 i.e. actual buy price of Rs 109.5 minus stop loss of Rs 5. Remember your actual trade may be lower than Rs 110 even when Buy order was a limit order as trigger price was 109.25 and not Rs 110. Remember, In Rare case, your order may become pending also at Rs 110, if price shoot up to above of Rs 110 from a single buy order of other client in market from Rs 109.25 to higher of Rs 110.

Buy_Cover_Order_with_First_Leg_is_also_Stop_Loss


Sell Cover Order where first leg is normal order

E.g. Reliance Current Price is Rs 100 and you intend to sell 100 shares @ Rs 105/- per share and to protect yourself from downside, you want to keep a stop loss of Rs 5.

To place Sell Cover Order go to order entry window and select Cover. Then you need to give the Quantity as 100, Price as 105 and Stop Price as 5.

So as on when Reliance Price rises to Rs 105 your Sell Order will get traded and a Buy Stop Loss Market Order (SLM) will get placed where price is Market and Trigger is 110. Remember your actual trade may be greater than Rs 110 (as this is SLM) as trigger will happen when last traded price will come to Rs 110 and trade will happen at best possible market rate.

Sell_Cover_Order_Where_First_Leg_is_Normal_Order


Sell Cover Order with first leg is also Stop Loss order

E.g. Reliance Current Price is Rs 100 and you intend to sell 100 shares if price goes to Rs 95/- per share and to protect yourself from downside, you want to keep a stop loss of Rs 5.

To place Sell Cover Order with First Leg is Stop Loss, go to order entry window and select Cover and then select SL. You need to give the Quantity as 100, Price as 95, Stop Price as 5 and first leg trigger price as Rs 95.75

So as and when Reliance Price goes to Rs 95.75, your Sell SL Order will get triggered with limit price of Rs 95. Assume 100 shares got sold @ 95.50. Now Buy Stop Loss Market Order (SLM) will get placed where price is Market and Trigger is 100.5 i.e. actual sell price of Rs 95.5 plus stop loss of Rs 5. Remember your actual trade may be greater than Rs 95 even when Sell Order was a limit order as trigger price was 95.75 and not Rs 95. Remember, In Rare case, your order may become pending also at Rs 95, if price shoot down to lower than Rs 95 from a single Sell order of other client in market from Rs 95.75 to higher of Rs 95.

Sell_Cover_Order_with_First_Leg_is_also_Stop_Loss

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Starting 1st Oct 2020, Clearing Corporations (CCs) is taking 4 snapshots of client position and margin thereof at random intervals. CCs are providing these Peak Margin files to Stock-Brokers/Clearing Members (TM/CM) to ensure that they are collecting margin upfront to meet the requirement of Peak Margin. This is in addition to existing Margin Collection, Reporting and Penalty requirement for end of the Day Margin Reporting.

Starting 1st Dec 2020, Clients would be subject to Peak Margin requirement as well as End of Day (EOD) Margin requirement. Short-fall in Peak Margin or EOD Margin would be subject to penalty at prescribed rates along with 18% GST.

The penalty would be collected by Clearing Corporations from Client through Stock-Brokers/Clearing Members.

What has changed at ProStocks:

  1. Effective from 1st September 2021, Client selling delivery from Demat Holding will get 75% Credit for Sale (CFS) on a real-time basis in Trading Application. Remaining 25% CFS will be available from next day.
  2. Client selling delivery from previous day's buy position, also known as T1 Holding or BTST or Stocks to be received (SR) will get 50% CFS on a real-time basis in Trading Application. Remaining 50% CFS will be available from next day.
  3. NRE, MINOR and NRO (without CP Code Client) will get 100% CFS for delivery sale and 65% for sale of T1 Holding or BTST or Stocks to be received (SR) and remaining from next day.
  4. Resident client has an option to opt for 100% CFS (65% for T1 Sale). Once opted they will not be allowed intraday as well as sq. off of delivery trades on same day.
  5. CFS will be at Zero percent for Stocks which are in Trade to Trade Category. NSE listed Stock having Series BE instead of EQ are Trade to Trade Stocks.

Why 75% CFS or 50% CFS instead of 100%

NSE allowed that Client's margin can be considered equal to 100% of the sale value once Early Pay-In of Securities sold by the Client through NSE Circular and Annexure A NSE/INSP/45191 dated July 31, 2020.

............However, in respect of sale of shares by a client for which early pay-in has been accepted by CC, since settlement of the trade is guaranteed by the CC, member may choose to give credit of the sale value of the shares in the ledger account of the client, which may be considered as margin towards subsequent trade/s of the client.

NSE by Download Ref No: NSE/INSP/46485 and Circular Ref. No: 72/2020 dated November 27, 2020, just a day prior to Peak margin Penalty provisions coming into effect has modified the above-said clarification/guidelines by an answer to question 1 of Annexure A of the said circular.

........However, the sale value of such securities (EPI value), as reduced by value of the 20% upfront Margin, shall be available as Margin for other positions across all the segments

Care and Caution for Client Trading Derivatives and availing In-built Hedge Margin Benefit (HMB)

Whenever you are removing hedge or sq off or changing the portfolio, Please extremely careful to first sq off the higher margin / naked or risky leg before you sq off the leg which created the hedge or reduced the risk and or Margin.

Example: Assume you have available Margin of Rs 1,60,000 and one lot Nifty Call Buy position for which you have blocked / paid margin of Rs 10,000. Now you want to sale one lot of Nifty Futures for which margin is Rs 1,60,000. Instead of you getting charge margin of Rs 1,70,000, You were subject to a margin of just Rs 17,000 (which is 10% of actual margin otherwise payable) for both the position, together and got HMB of Rs 1,53,000. Post this position, now you have an available margin of Rs 1,53,000. Further, assume that you bought delivery of Rs 1,50,000 from the available margin of Rs 1,53,000 and the now available margin is Rs 3,000.

Now if you go ahead and do sale / sq off of one lot Nifty Buy Call leaving one lot Nifty futures sale as naked/unhedged position and margin requirement for this position is Rs 1,60,000 against available Margin of Rs 13,000 (Rs 3000 plus RS 10000 from sale of Call Option) leaving Margin Shortfall of Rs 1,47,000.

Be extremely careful to sq off the naked leg first which in this case was Nifty Future Sale position before you sq off leg which created hedge. In case of Margin shortfall even of peak margin and even for a few seconds, you are expressly agreeing to agree to bear the penalty and consequences thereof.



S P Toshniwal

www.prostocks.com

+91-22-62434343

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Monthly Unlimited Brokerage Plan

ProStocks provides a monthly brokerage plan of Rs 899/- to trade in Equity and FNO in an Exchange (either NSE or BSE). Monthly brokerage plan of Rs 499/- to trade in Currency Futures and Options in an Exchange is also available. These plans allow you to trade unlimited without paying any additional brokerage in a calendar month. The plan also works with API.

You have an option to combine the multiple plans like Rs 1798 to trade in Equity and FNO at NSE and BSE, both. You can also have Rs 1398 to trade in Equity, FNO and Currency at NSE.

The monthly unlimited trading plan offers up to 90% saving in brokerage in comparison to discount brokers like Zerodha, Upstox and Angel One.

What is included in monthly brokerage plan?

  • All orders placed by the client through Web, Mobile, Desktop Trading Application and API are included.
  • All order types like Cover Order, GTT order, Bracket Order, basket Orders, etc. are included.

What is excluded in monthly brokerage plan?

  • Orders are placed through call and Trade Desk.
  • Order placed by RMS system to sq off pre-defined intraday position or margin reducing orders.
  • Any order not placed by the client.
  • All levies like Exchange Transaction Charges, Securities Transaction Tax, Stamp Duty, SEBI Turnover Fees, GST charged by Exchanges and Government will be charged.
  • Demat Charges on Demat Transaction will be charged Rs 20 plus GST, separately.
  • This plan is not available for NRI accounts.

What are the restrictions in monthly plan?

There are no restrictions in terms of the number of orders or trades. Any abuse of system like putting orders to manipulate the market or artificial market creation of false liquidity creation orders etc. are not permitted.

Note: ProStocks Monthly Plan is Calendar month Plan like April, May, June, July, etc. This is not 30 day Plan like 15th June to 14th July. Whichever date you begin, your month will end on the last calendar day of the month.

How Plan Brokerage is collected?

ProStocks will charge you Plan brokerage in the Contract Note @ 2.5% of the value of the Trades in such a way that we will keep charging you the brokerage till plan brokerage is recovered during the calendar month and will stop charging you the brokerage as soon as plan brokerage is recovered, for remaining days of the calendar month.

We may charge you a very small nominal brokerage not exceeding Rs 1 per day on days when no brokerage is charged in the Contract Note. Such brokerage generally will not exceed Rs 10 per month or so.

Since Plan Brokerage is not debited to your ledger with ProStocks but recovered in the SEBI approved mechanism of charging brokerage in the Contract Note, you will not be charged Plan brokerage in a particular calendar month, if you have not done any trades. You will not be charged even if you have a balance in your ledger with us.

E.g. in any particular month, you have done trades of buying option premium worth Rs 10,000 and not done any trade thereafter for the renaming days of the calendar month. You will be charged Rs 250 (i.e. @ 2.5% of Rs 10,000) and the remaining Rs 649 will not be charged to you. This Rs 649 will not be carried forward to next month. ProStocks will simply forgo Rs 649.

Can I change my Monthly Brokerage Plan?

Yes, you can change your Monthly Brokerage Plan at any time. You just need to send one signed Brokerage Plan Sheet on [email protected].

Please read below FAQ to know the process.

How to change Monthly Brokerage Plan to Flat Fee Brokerage Plan and vice versa?

Video Explanation

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Order types:

  1. Stop Loss Limit & Market order
  2. After Market orders – can schedule it during live market for the next day as well
  3. Cover orders – Place a normal order and a position reversing stop loss order at once
  4. Bracket orders – Place a normal order, position reversal order & target profit order at once
  5. Bracket order with Trailing stop loss order coming soon
  6. Good till Traded order (GTD) : Place conditional orders and the order will be valid till the order is not executed
  7. Bulk orders
  8. Hedge margin benefit is available
  9. Check the margin requirement of covered call/put before you place the order
  10. You can place a normal square off as well as stop loss order without additional margin
  11. Interoperability between NSE & BSE available
  12. Hedge Nifty Futures position with Sensex futures position
  13. Square off USDINR position at NSE in CDSL segment in BSE

(No extra brokerage for any special order)

API:

  1. Web Socket API available
  2. Dot Net/ C sharp API for thick client available
  3. Rest API for Algo with web socket available
  4. Monthly unlimited Brokerage plan in API to Resident clients available

Fox Trader available at concessional rates (Advanced Trading software)

Miscellaneous:

  1. Mobile (android or iOS), Web & Desktop Trading application available
  2. Refer and Earn program: Minimum 10% (can go up to 30%)
  3. Trading & DEMAT AMC lifetime free
  4. Zero brokerage for delivery trades under Flat Fee plan

For NRO NON PIS clients:

  1. Place intraday orders in Futures & Options
  2. Buy shares which are in NRI Breach list or Red Flag list
Comment (5) Hits: 958

Starting 1st Oct 2020, Clearing Corporations(CCs) is taking 4 snapshots of client position and margin thereof at random intervals. CCs are providing these Peak margin files Stock-Brokers / Clearing Members (TM/CM) to ensure that they are collecting margin upfront to meet the requirement of Peak Margin. This is in addition to existing Margin Collection, Reporting and Penalty requirement for end of the Day Margin Reporting.

Starting 1st Dec 2020, Clients would be subject to Peak Margin requirement as well as End of Day (EOD) Margin requirement. Short-fall in Peak Margin or EOD Margin would be subject to penalty at prescribed rates along with 18% GST.

The penalty would be collected by Clearing Corporations from Client through Stock-Brokers / Clearing Members.

What has changed at ProStocks :

  1. Effective from 1st March 2021, Client selling delivery from Demat Holding will get 50% (70% between 1st Dec 2020 to 28 Feb 2021) Credit for Sale (CFS) on a real-time basis in Trading Application instead of 100% (Prior to 1st Dec 2020), in all the three Trading Platform which we have, Namely PROSTOCKS, PRO AND BEST. Remaining 50% CFS will be available from next day.
  2. Client selling delivery from previous day's buy position, also known as T1 Holding or BTST or Stocks to be received (SR) will get 50% CFS on a real-time basis in PROSTOCKS AND PRO Trading Application and Zero (NIL) instead of 100% CFS (Prior to 1st Dec 2020), they were getting so far. Remaining 50% CFS will be available from next day.

Why 70% CFS or 50% CFS instead of 100%

NSE allowed that Client's margin can be considered equal to 100% of the sale value once Early Pay-In of Securities sold by the Client through NSE Circular and Annexure A NSE/INSP/45191 dated July 31, 2020.

............However, in respect of sale of shares by a client for which early pay-in has been accepted by CC, since settlement of the trade is guaranteed by the CC, member may choose to give credit of the sale value of the shares in the ledger account of the client, which may be considered as margin towards subsequent trade/s of the client.

NSE by Download Ref No: NSE/INSP/46485 and Circular Ref. No: 72/2020 dated November 27, 2020, just a day prior to Peak margin Penalty provisions coming into effect has modified the above-said clarification/guidelines by an answer to question 1 of Annexure A of the said circular:

........However, the sale value of such securities (EPI value), as reduced by value of the 20% upfront Margin, shall be available as Margin for other positions across all the segments

Care and Caution for Client Trading on BEST Platform for Derivatives and availing In-built Hedge Margin Benefit( HMB)

Whenever you are removing hedge or sq off or changing the portfolio, Please extremely careful to first sq off the higher margin / naked or risky leg before you sq off the leg which created the hedge or reduced the risk and or Margin.

Example: Assume you have available Margin of Rs 1,60,000 and one lot NIfty Call Buy position for which you have blocked/ paid margin of Rs 10,000. Now you want to sale one lot of Nifty Futures for which margin is Rs 1,60,000. Instead of you getting charge margin of Rs 1,70,000, You were subject to a margin of just Rs 17,000 ( which is 10% of actual margin otherwise payable) for both the position, together and got HMB of Rs 1,53,000. Post this position, now you have an available margin of Rs 1,53,000. Further, assume that you bought delivery of Rs 1,50,000 from the available margin of Rs 1,53,000 and the now available margin is Rs 3,000.

Now if you go ahead and do sale / sq off of one lot Nifty Buy Call leaving one lot Nifty futures sale as naked/unhedged position and margin requirement for this position is Rs 1,60,000 against available Margin of Rs 13,000 ( Rs 3000 plus RS 10000 from sale of Call Option) leaving Margin Shortfall of Rs 1,47,000.

Be extremely careful to sq off the naked leg first which in this case was Nifty Future Sale position before you sq off leg which created hedge. In case of Margin shortfall even of peak margin and even for a few seconds, You are expressly agreeing to agree to bear the penalty and consequences thereof.

Impact of Peak Margin Reporting effective 1st Dec 2020 on Resident Indian Client using the PROSTOCKS, PRO and BEST Trading Platform

Impact of Peak Margin Reporting effective 1st Dec 2020 on Non Resident Indian Client having NRE Trading and Demat Account linked with NRE PIS Bank Account and using the PROSTOCKS , PRO and BEST Trading Platform provided by ProStocks

NRI Client buying against sale of delivery or against PIS Bank balance has to ensure that their Bankers makes us payment by Trade Plus 1 Days. Most Banks including HDFC Bank has allowed NRI to debit their PIS Bank Account and credit Sunlight Broking LLP ( ProStocks 's Bank Account with respective Banks).

In case funds are not received by Settlement Date ( Which is Trade plus Two Trading Days) , Exchanges / Clearing Corporation will levy penalty of 1.18 % ( 1 percent plus 18 percent GST on 1 percent) of shortfall amount for two days, so this will be 2.36 percent for the shortfall amount.

ProStocks will recover from client and will make the payment to Exchanges/ clearing corporation.

Impact of Peak Margin Reporting effective 1st Dec 2020 on Non Resident Indian Client having NRO NON PIS Trading and Demat Account linked with NRO Savings Bank Account and using the PROSTOCKS , PRO and BEST Trading Platform provided by ProStocks


Peak Margin Reporting and its Impact effective 1st September, 2021



S P Toshniwal

www.prostocks.com

+91-22-62434343

Comment (1) Hits: 2546

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