An intraday order (MIS/CO) gives you the opportunity to use leverage to enter into buy or sell trades. You are able to buy trades for more than the money in your account and sell or short trades where you can sell a stock without having to hold it in your demat account. However, such intraday trades are to be squared off by you mandatorily on the same day. If this is not done, then our system will do it on your behalf, i.e., by the end of the market day.
While trading MIS or CO you carry the risk of losing the money due to leverage as well as the additional risk of not being able to square off your positions because of the stocks hitting the upper or lower circuit. There’s also a possibility of ending up with a huge overnight and auction risk on positions taken with leverage.
Let’s understand this with two scenarios.
An open sell intraday position and stock hits upper circuit
You will only have buyers and no sellers, if a stock hits the upper circuit. So, you won’t be able to purchase back the stock you sold for the intraday. This intraday trade will then convert into a delivery trade.
An open buy intraday position and stock hits lower circuit
You will only have sellers and no buyers, if a stock hits the lower circuit. In this case you won’t be able to sell the shares you have purchased. Again this gets converted into a delivery trade.