What are cover orders and how to use them?
A Cover Order (CO) is an order with an in-built risk mitigation mechanism. Simply put, a cover order is a market order or limit order that is placed along with a stop loss order. Since a stop loss order is placed, the maximum loss you will bear is known in advance if the trade moves against you.
Cover orders’ purpose is to reduce the risk for the broker and the trader and enable the trader to get higher leverage.
Since a cover order is either a market order or a limit order placed along with a compulsory stop loss order in a specified range, you cannot cancel this stop loss order.
Considering the stop loss order is being placed at the same time while getting into the contract, the risk automatically reduces.
CO is only for intraday, and any open intraday positions will be auto squared-off by our system if you do not square them off within the stipulated timings. To know about the auto square off timings, click here .
However, it is important to note that Intraday square off timings can change based on the discretion of our risk management department.
COs aren't allowed on BSE and across F&O segments.
Remember, while placing a buy CO, your limit price has to be higher than your stop-loss trigger price, and while placing a sell CO, your limit price has to be lower than your stop loss trigger price. The stop loss trigger price is allowed within the range of 10% while placing a CO. Check the below GIF on how to place a CO.
If one leg of the cover order is rejected/cancelled for any reason, you will have to reach our support desk over the phone to square off the position. Please get in touch with us on our helpline at 080 4718 1888 / 080 4719 1999 from 8:30 AM to 4:30 PM on working days.
Any outstanding single leg positions may also get squared off on our end under our RMS policy. Read more in this Z-connect post .
Cover orders are not allowed across F&O segments, since additional leverage is not provided for CO on index options. To know more, click here .