What's the advantage of CNC over MIS?

Trading
1

Hi,

I am new to trading, and I want to know the advantages of CNC over MIS, I know that MIS is for intraday trading, but I can also buy shares and not trade them, what difference does it make compared to CNC? I also don’t see extra charges for it, can anyone explain? Thanks.

2

CNC order is used when one wants to carry forward their position and hold it for more than a day.

MIS is specially used for Intraday trades, as it gives leverage, which can help you take trades of bigger size with small capital.

Eg. if leverage offered is 10x, then with only 10000 in your account, you can trade shares worth 100,000.

While using CNC, you don’t get any leverage. You can check out this post explaining different order types in detail.

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3

CNC and MIS are products, designed by broker to leverage the trades. Mostly CNC is used for taking delivery of the stocks, if you are willing to hold the shares for a certain time period you can use CNC while making purchases. MIS is an Intraday product you must close the position on same day. To know more about CNC & MIS please refer below link.

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4

What happens if I don’t close it on the same day? Do I lose the stocks?

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5

Interesting, what happens if I made a loss and don’t have capital to cover it?

6

If position is created using MIS as product and if you do not square it off it will be auto squared off by our RMS team post 3.20 PM for Equity, 3.25 PM for F&O, 4.45 PM for CDS and 25 mins before market close for MCX.

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7

Your account will result in debit balance, on which you’ll be charged interest at 0.05% per day.

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8

! Good to know, but I was not aware of this and I do not want to attract the Rs. 50 + GST charges, what do I do in this situation? Can I convert it to CNC?

9

I found the answer in this knowledge post:

The conversion was instantaneous, so I would like to know if there are any charges involved in this conversion?

10

There are no charges for converting your position.

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11

Excellent, so that means there is no penalty for choosing the wrong product on placing the order since it can be freely converted, am I right?

12

I would like to reiterate the importance of “auto-square off” as it can cause you a loss if you are trading MIS when the market is near closing time… I recently lost a trade and also had to pay the call and trade charges on top of it. Here is the official response I got from Zerodha’s support portal:

You can convert your trades but any mis orders after 3.20 cant be converted as zerodha rms will try to auto sq off from 3.20 (for cash)

Open intraday positions are auto squared-off by our system at/after the below mentioned time for each segment:

Particular Equity/Cash Equity Derivatives Currency Derivatives Commodities
Auto square off time 3:20 PM 3:25 PM 4:45 PM 25 minutes before Close

Note:

  1. Auto square-off(Call and trade) charges of Rs 50(+GST) apply for each order squared-off by our system. It is recommended that you close your open intraday positions before the above mentioned time.
  2. Based on market volatility, intraday square off timings can change at the discretion of our risk management team. It is typically between 3.15 PM to 3.20 PM for Equity, 3.25 PM for F&O, 4.45 PM for currency and 25 minutes before market close for commodities. You can follow this bulletin to be informed of any advances in the auto square-off timings.

So please trade CNC if you want to avoid any unnecessary risk, especially when market closing time is near :pray: