How to short sell shares in equity and futures?
A short sale (or short sell) is a trade taken when a trader feels that the price of the security is likely to decline from its current price. In a short sale transaction, the security is sold first and bought back later on.
To short in Equity (EQ) segment, the order must be placed using intraday order type, i.e. MIS (Margin Intraday Square Off) or CO (Cover Order). This is because short positions in the equity segment cannot be carried or held overnight. To learn more, see What does CNC, MIS and NRML mean?
If the short position or the sell position in the equity segment is not exited (bought back) before 3:20 PM, the position will be squared off by Zerodha, and auto square-off charges will be applied. To learn more, see What are call and trade (auto square off) charges? However, the onus of squaring off positions is on the client, not the broker. If the client or the broker fails to square off the short position on the same day due to various reasons like stock hitting the upper circuit or lack of liquidity, it may result in short delivery. To learn more, see What is short delivery and what are its consequences?
A futures contract can be shorted and can be carried or held overnight, unlike short selling in the equity segment, where the position must be squared off on the same day. To place a sell order for futures contract, MIS (for intraday) or NRML (for overnight) product type can be used to place a sell order. However, If a futures contract is traded using MIS, it must be converted to NRML to carry it overnight or must be squared off before 3:25 PM to avoid auto square-off charges. To learn more about futures and shorting, visit zerodha.com/varsity/module/futures-trading and zerodha.com/varsity/chapter/shorting.