What are Cover Orders? How do they work?

Published Oct 17, 2024

Cover Order (CO)

A Cover Order is a market or limit order placed along with a compulsory Stop Loss order. In a Cover Order, the buy/sell order is either a market or limit order, and it is accompanied by a mandatory Stop Loss order within a pre-defined range set by the system. This Stop Loss order cannot be canceled.

Since the Stop Loss order limits potential risk, the margin requirement is automatically reduced, providing more leverage to clients for intraday trading.

Kindly note that all cover orders (CO) are squared off at 3:20 PM (Cash/Futures), 4:50 PM Currency (CDS), and 11:00 PM /11.30 PM (MCX).

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How To Place Cover Order:

For placing a cover order add the script in the market watch as shown below. For Buy cover order click (Shift+F1) & Sell Cover Order (Shift+F2). The Buy/Sell order will execute at the market price/limit price and stop-loss can be defined as per the defined stop loss range.

 

Order Book (View Completed and Stop Loss Pending)

Once the CO order is placed completed market order or limit order and pending stop loss will be shown in the order book (F3). You can verify that it a cover order as the product type will be CO for the same. Stop Loss can be modified from the order book by using modify from the bottom of the window in the prescribed range only. Also note that against buying CO selling order should not be placed, as it will create a fresh position in your account and vice-versa.

Note: If you want to close the position at the current market click Exit from the bottom of the window. It will be executed completely as a partial position cannot be closed in CO.

 

Admin Position

You can view overall profit & loss from the Admin position (F11). Select Netwise and click Get positions.

 

To summarize

  1. Cover Order is purely a market order & limit order with a mandatory stop loss within a pre-defined trigger range that reduces risk.
  2. Margin utilized in cover order will be approx. 20% of overall margin in NSE Futures/MCX/CDS thereby giving more leverage for intraday trading. Kindly refer this LINK for updated margin.
  3. Position cannot be executed partially and to book profit pending stop loss has to be Exit at market price from order book (F3)
  4. Cover Order cannot be converted to NRML/CNC i.e. same cannot be carried to next trading as it is purely an intraday trade.

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