Help!.. Shorted SUZLON big qty and couldn't square off as it hit upper circuit

Trading
1

Ended up shorting big qty of suzlon today. As luck would have it the stock was in upper circuit almost throughout the day. Ive read some posts and videos and understand there would be a penalty, auction etc. I have kept 120% of the shorted amount in funds after market closing today. My question-

  1. Do I need to do anything tomorrow or day after or simply wait till T+2 i.e. Friday?
  2. I am bit confused about the part where I need to maintain 120% of the sold value in funds. Can anyone explain?

Tx.

2

Hi @Rajesh_K

For shares sold on Wednesday , the auction happens on Thursday, with the closing price of Wednesday used to determine the auction price. The price range of the auction is capped at 20% at the upper and lower end. For this reason, an additional 20 % is blocked in the seller’s Zerodha account until auction settlement.

The exchange delivers the shares to the buyer’s demat at the auction price on Friday, and the defaulting seller is sent an auction note and is obligated to pay an auction penalty to the exchange.

3

The stock had hit upper circuit day before yesterday. The same day following entries could be seen in the statement

-Short delivery margin blocked for sale of SUZLON till exchange auction settlement 2024138 (This figure was 15% higher than the sale value)
-DP Charges for Sale of SUZLON on 24/07/2024 - Rs 15.34
-Net settlement for Equity with settlement number: 2024138 - Original sale value

So 15% appears to have been deducted along with a small number of shares in my holdings which were automatically sold off the following day.

Just now I got a contract note from zerodha which mentions the total amount due which is almost the transaction value itself!!! As 15% has already been deducted day before yesterday, could there be anything further to settle? I will check with customer care too.

4

Does this mean you incurred approximately ₹3 lacs loss on this trade ?

5

It appears the penalty is lesser than I thought. However there is confusion over the exact figure as the few shares that I had in holdings were automatically sold and need to be considered while calcultating the loss. The blocked amount has been reversed and auction settlement value updated in statement. However the fund balance is not yet updated. Will need to check next week.

LESSONS Learnt -

  1. HUGE mistake I did in this case was not placing the buy order at the upper circuit that day. It just might have squared off as I believe transactions do happen even when share is at upper circuit. It completely skipped my mind that penalty has to be paid when the position isn’t squared off. Foolishly thought it would square off automatically at 3:20 or probably post market.

  2. Placing big qty instead of smaller one. Bigger quantity also means bigger penalty.

  3. Market is quite good these days. Shorting doesnt even make sense on certain stocks. Much better to not take a trade at all in case of confusion.

1 Like
6

I would like to add one more point under the lesson learnt tab:
Dont short/long stocks which are not in the FnO category. Especially intraday and that too in a big quantity.

1 Like
7

Exactly

8

Keeping a stop order at upper circuit does not give any guarantee that it will execute. It can slip too and you could be far behind in queue. Better be safe and keep buy order atleast a few % below circuit level.

9

Good one.

And let me add one more, if you serious about trading intraday in stocks, use bracket orders.

Espresso provides one of the best improve version of BO.

Just hate reading about losing too much than you anticipated.

Keep some controls over your trades, else you ll never arrive.