An intraday (MIS/CO) order allows traders to use leverage to enter buy or sell trades, with the potential to trade up to 5 times the available funds in their account. With these orders, traders can buy stocks with more funds than they have or sell stocks without actually holding them in their demat account. However, it's important to note that intraday trades must be squared off on the same day. To learn more about auto square-off timings, see What are the auto square-off timings for open intraday positions?

If traders fail to square off an intraday position, Zerodha will attempt to square off the positions on their behalf before the market closes. It's crucial to be aware that trading with MIS/CO orders carries additional risks, apart from the potential loss due to leverage. There is a possibility that traders may not be able to square off their positions if the stock hits the upper or lower circuit limit. This can result in significant overnight and auction risks associated with leveraged positions. To learn more about circuit limits, see What are circuit limits or price bands?

If there is an open sell intraday position, the stock hits the upper circuit limit.

When a stock hits the upper circuit price, there are only buyers in the market, and no sellers are available. This means that it becomes difficult to repurchase the stock that was initially sold for intraday trading. As a result, the intraday trade automatically converts into a delivery trade. Here is a screenshot of Reliance Capital trading at the upper circuit for the day:

If the stock is held in the demat account, it will be transferred to the exchange. However, if the shares are not available, there will be a situation of short delivery or default on the sell trade. Exchanges conduct auctions to purchase the shares on behalf of the seller and deliver them to the buyer of the sell trade on T+2. This may result in an auction penalty based on the settlement price. Additionally, an amount equivalent to 120% of the closing price on the date of the sell trade will be blocked in the account with the narration "Short delivery margin blocked for sale of <scrip name>" until the auction is completed. To learn more, see What is short delivery and what are its consequences?

If there is an open buy intraday position, the stock hits the lower circuit limit.

When a stock hits the lower circuit price, there are only sellers in the market, and no buyers are available. This means that it becomes difficult to sell the stock that was initially bought for intraday trading. As a result, the intraday trade automatically converts into a delivery trade. Here is a screenshot of ADANI POWER trading at the lower circuit for the day:

If sufficient funds are available in the Zerodha account, the stock will be delivered to the demat account. However, if there are insufficient funds, the client has two options. They can either add the required funds to complete the transaction or sell their existing holdings to the extent of the required funds. Failure to take either of these actions will result in Zerodha selling the stock to cover the required funds.