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.