BTST : What you need to be careful of!

BTST : What you need to be careful of!

Fellow Traders

BTST refers to Buy Today and Sell Tomorrow

But here is something which you need to be careful of while executing this strategy in trading online.

As you all know, Cash Delivery Trades are settled on a T+2 basis in India. This means that if you buy delivery on Monday, then you have to pay the exchange on Wednesday and you will get the corresponding delivery on Wednesday after the payment. Similarly, if you sell delivery on Monday, then you have to pay the shares on Wednesday to the exchange and will get the corresponding payment on Wednesday after you have transferred the shares.

You need to be careful of short delivery from the exchange while buying delivery today and selling the same delivery tomorrow.
Let’s say that you buy 100 shares of Reliance on Monday and sell those same shares on Tuesday. Theoretically, there is no problem with these trades as your shares will be payed out on Wednesday to you from the exchange and you will have to pay in those shares to the exchange on Thursday. Completely Fine.

But practically, if the shares you sell on Monday are NOT payed out from the exchange on Wednesday, that is there is a short delivery from the exchange, then you will not be able to pay in those shares on Thursday (for the selling trade on Tuesday). In that case, your delivery pay in will be short to the exchange (for your selling trade) and the corresponding delivery will be auctioned at whatever price the exchange determines. More often than not, an auction results in a loss to the trader.

So traders need to be careful when buying today and selling tomorrow (BTST) in case of delivery as they are liable for any auction loss due to short payout from exchange. This happens very rarely in blue chip stocks, but can happen more often in Penny and Trade to Trade stocks.

8 Comments

  1. 1

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  2. Whether btst trading is posdible r not, what is the solution todo btst trading

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  3. Whether btst trading is possible r not, what is the solution todo btst trading

    Reply
  4. What is the remedy of this problem ?

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  5. That’s a very helpful article. Trades in which,shares bought on monday and sold on tuesday are refferred to as “BTST”. trades where shares bought on monday are sold on wednesday, such trades are called T+2 trades. If the shares are bought on monday and sold on tuesday, i.e the very next day, there are chances of heavy penalty. It can be two to three times of the traded amount. In such trades, shares are assumed to be shorted by the trader. Therefore, BTST MUST BE AVOIDED

    Reply
    • Hi Anish

      You got it right but the penalty levied will not be 2-3 times of traded price it will be maximum of 20% from your traded price.

      Reply
  6. Anish Sir,
    I have one doubt. Whether it is guaranteed that shares bought on monday will be credited to account on wednesday ? If not, then there will be penalty due to short selling on wednesday also.

    Reply
    • Hi A.K BEHERA

      There might be probability of shares not being credited on Wednesday also the same can be confirmed only on Wednesday post 2.00 PM and yes if the shares are sold on Wednesday in that case there shall be penalty levied from the exchange end .

      Reply

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