Intraday trading is based on many things starting from leverage to trading strategies you use. The type of order also plays an important role in Intraday trading. Do you know How to Place cover order in zerodha? If your answer is no, let’s discuss this topic in detail.
Table of Contents
What is Cover Order?
A Cover Order (CO) is a type of order in trading that comes with a risk management technique integrated. In simple words a cover order is a market or limit order combined with a Stop Loss order.
Since a Stop Loss order is imposed you know how much money you’ll lose if the trade goes against you. The goal of cover orders is to minimize exposure for both the broker and the trader while also allowing the trader to use more credit.
Conditions of Cover order
- A Cover Order consists of a market or limit order combined with a mandatory Stop Loss order in a specific range. This Stop Loss Order is indefinite.
- So the Stop Loss Order is placed immediately with the entry into the contract, the risk is automatically reduced; as the risk lowers, so does the margin required. As a result, more leverage is available.
- On the BSE exchange, stock options, and currency options, COs are not permitted.
- you use CO only in Intraday, the platform will automatically square off any open intraday positions if you do not square them off within the specified timings.
Note:
Consult with your brokerage firm for the current up-to-date CO leverage and The timings for intraday position automatically square off is 3:20 PM.
How to Place cover order in Zerodha?
Your limit price must be greater than your stop-loss trigger price when putting a buying Cover order, and your limit price must be lesser than your stop-loss trigger price when executing a selling Cover order. While executing a Cover Order, the stop loss trigger price is permitted to be within a 10% zone. To see how to place a Cover order, look at the below video.
Example of Cover Order
Let’s assume someone wants to buy Bajaj finance future with a lot size of 125 for at current market price of Rs 5616. Along with the buy order to buy the future at Rs 5616, and placed stop loss at Rs 5550 which must also be included in a cover order. The stop loss price should be within the order window’s predetermined range.
Scenario 1
If it goes up to 5700 within a day and you squared off the position at 5700. You will earn a profit of Rs. 10500.
Scenario 2
if it goes down to 5550 within market hours then your stop-loss will be triggered and you will book a loss of 8250.
Scenario 3
If It remains range bound and doesn’t move on either side much, then you need to square off the position before 3:20 or Zerodha will automatically square off your position and charge you a penalty of INR 50 per order.
Modification in cover Order
Yes, Modification is allowed in cover order as per below conditions
- The limit value and the stop loss can both be revised if the first order is not executed.
- Just the stop loss rate can be revised if the initial order is executed.
Difference Between Cover Order and Bracket Order
| Specifications | Bracket Order | Cover Order |
| Definition | This is a three-in-one order since two orders are integrated with the initial order. | Due to the initial order can only be paired with a stop-loss order, this is a two-legged order. |
| Inclusions | Initial, stop-loss, and exit orders are all part of the bracket order. | Initial and stop-loss orders are included in the cover order. |
| Exits | The machine will only square off the order in platform order if both the stop loss and goal orders are useless. | It simply depends on the stop-loss order in a cover order. |
Conclusion
Cover Order is a simple order with stop-loss to offer extra leverage from the brokerage firm to the customer as risk is less than the regular order.
This is all from our side regarding How to Place cover order in zerodha? Let us know your views about what is cover in zerodha in the comment section.
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FAQ About cover order zerodha
how to place cover order in zerodha mobile app?
You can click on the stock name in the watch list on buy or sell to place a cover order.
Cover order charges in Zerodha?
Cover Order changes are the same as Intraday charges INR 20 per order.
How to exit cover order in zerodha?
You can simply click on three dots which are next to your positions to exit the open orders.
How to modify cover order in Zerodha?
You can click on the order and modify the stop loss within a range.
Zerodha Cover order not working?
This might happen due to market volatility or technical error.
