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What is the Importance of BTST?
BTST (Buy Today Sell Tomorrow) is a trading facility that allows selling shares before they are credited to your account. It can be used for 2 trading days following the buy order, after which shares are delivered to your demat account, enabling normal sell transactions. Only a few brokers offer this unique facility, and approval is required for specific scripts, such as NIFTY, NIFTY Junior, and Margin Trading Scripts on ICICI Direct.
SME companies are usually not eligible for BTST (Buy Today Sell Tomorrow), and it is also unavailable for stocks in the T2T Segment, where mandatory stock delivery is required. Read and find out all about BTST (Buy Today Sell Tomorrow).
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What is the Importance of BTST?
In a regular equity delivery trade, the transaction is completed in T+2 days, with the buyer receiving shares in their demat account and the seller obtaining money after T+2 days. This means that if you buy shares on Tuesday, they will be credited to your demat account on Thursday.
Holidays are excluded when counting the T+2 days, which may extend the delivery period. However, traders cannot book profits or losses during this period, potentially resulting in losses.
BTST (Buy Today Sell Tomorrow) addresses this issue by allowing traders to buy or sell securities before they are credited, enabling them to take advantage of short-term price volatility.
Read and know – Stocks, IPO or Mutual Funds: Which is the Better Investment Option for You?
How to Start BTST Trades?
To engage in BTST (Buy Today Sell Tomorrow) trades, simply purchase stocks using the CNC (Cash and Carry) product type and sell them the following day using the same product type. The broker handles these transactions seamlessly. No specific order type selection or intricate steps are necessary to utilize the BTST facility. There are no special approvals or permissions required for this service.
However, it is important to note that BTST (Buy Today Sell Tomorrow) trades are not permitted for Trade to Trade stocks and stocks under GSM (Graded Surveillance Measures) or ASM (Additional Surveillance Measures).
BTST Pros and Cons
BTST (Buy Today Sell Tomorrow) trading offers advantages and disadvantages.
BTST Pros
- On the positive side, it allows investors to benefit from short-term volatility in stock prices.
- Additionally, BTST trades do not incur Demat Debit Transaction Charges as shares are not credited to the demat account.
- Furthermore, if intra-day trading proves unprofitable, BTST (Buy Today Sell Tomorrow) provides an additional two days to improve trade performance.
BTST Cons
Unlike intraday trading, margin is typically not offered by stock brokers for BTST trades, requiring customers to pay the full amount upfront as cash and carry orders.
A risk of short delivery is also involved.
BTST Vs Intraday Trading
BTST (Buy Today Sell Tomorrow) and intraday trading are two different approaches to trading in the stock market. Here are the key differences between them:
Option to sell the shares
In BTST trading, you have the option to sell the shares either on the same day or the next trading day. This means you can hold the shares overnight before selling them.
In Intraday Trading, you are required to sell the shares on the same day of executing the trade. If you do not sell the shares by the end of the trading day, you have the option to convert the trade into a delivery trade, where the shares will be delivered to your demat account.
Settlement Time
In BTST trading, you have two days to settle the trade, which means the shares need to be delivered to your demat account within two days.
In Intraday Trading, the settlement needs to be done on the same day of trading.
Margin and Leverage
BTST (Buy Today Sell Tomorrow) trading does not offer any additional margin or leverage.
On the other hand, intraday trading provides higher margins, allowing traders to trade with a multiple of their available capital. Brokers typically offer margins ranging from 5x to 50x for intraday trading.
Delivery Risk
In BTST trading, there is a higher risk of non-delivery of shares from the person you purchased them from. This means that if the person fails to deliver the shares, you may face difficulties in settling the trade.
In Intraday Trading, there is no risk of short delivery since buying and selling happen on the same day.
BTST Vs Delivery
BTST (Buy Today Sell Tomorrow) and delivery are two different methods of trading in the stock market. Here is a comparison of BTST and delivery in terms of various aspects:
Timeframe
BTST allows you to buy shares today and sell them the next trading day before the market closes.
Delivery trading involves buying shares and holding them in your demat account for a longer period.
Settlement Period
The settlement period for BTST trades is T+2 days, which means the shares need to be delivered to your demat account within two trading days.
In delivery trading, the shares are delivered to your demat account on T+2 days.
Brokerage
The brokerage charges for BTST (Buy Today Sell Tomorrow) trades are the same as delivery trades. For example, Zerodha offers brokerage-free delivery trades.
The brokerage charges for delivery trades are applicable as per your broker’s fee structure.
Leverage
Typically, there is no leverage offered in BTST trades. You need to have sufficient funds in your trading account to make the purchase.
Similarly, there is no leverage offered in delivery trades. You need to pay the full amount for the shares you purchase.
Risk
BTST trading carries a higher risk of non-delivery of shares from the person you purchased them if they fail to deliver them on time.
In delivery trading, there is low risk as the shares are already in your demat account before you sell them.
BTST Brokerage Charges
BTST (Buy Today Sell Tomorrow) brokerage charges vary depending on the trading scenario. If you sell on the same day, it is considered an intraday trade, and intraday brokerage charges apply. If you sell on the next trading day (T+1 or T+2), equity delivery brokerage charges are applicable. Some brokers may offer brokerage-free equity delivery for BTST orders. It is advisable to confirm the specific BTST brokerage fees with your broker.
Open an account with Zerodha.
Read and know about Best Bonus Shares: Top Companies in H1 of 2023 in India.
Conclusion
So that is all about BTST (Buy Today Sell Tomorrow). Upstox, a brokerage firm, discontinued its BTST (Buy Today Sell Tomorrow) facility in September 2020 due to SEBI’s new margin policy. However, Zerodha’s trading platform, Kite, still allows BTST trades, albeit with a slightly different process. To execute BTST trades on Kite, users need to place a normal order and select the CNC (Cash N Carry) product type when buying and selling stocks. On the other hand, Angel One, another brokerage firm, continues to offer the BTST facility to its clients without requiring any special permission. Angel One customers can avail of the BTST facility by default.
