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Product Types in Trading

Trading product types are the product codes used for trading based on whether you intend to buy and sell the same day or take an overnight position.

The product type in trading helps achieve your trading objective of whether you wish to take the delivery of stock and hold them from a long-term investment perspective or exit your positions the same day to book quick and targeted returns.

There are three product types in the stock market:

  1. MIS
  2. CNC
  3. NRML

Let us have a look at each product type in detail:


1. MIS Product Type

MIS stands for Margin Intraday Square-off. MIS product code in the share market is used when an investor wants to buy and sell the same day and does not intend to take delivery of the stocks or carry forward their positions.

MIS product type is available for intraday trading across all segments - Equity, F&O, Currency, and Commodity.

Benefits of MIS order

  • Higher leverage for MIS orders which helps to trade more than the available margin amount.
  • No overnight position risk.
  • Do not attract any DP charges.
  • Can do short selling.
  • Helps to book quick returns.

Risks in MIS order

  • Equity MIS orders generally have higher brokerage compared to Equity delivery brokerage which is offered free of cost by many online brokers.
  • Can attract auto-square off charges in case of failure to square-off the position by self before the auto-square off time.
  • Risk of loss in case of unfavourable price movement.

MIS order auto-square off timings

The open intraday positions should be closed before 3:00 - 3:20 PM. If an investor fails to exit the open intraday positions by the specified time, the broker initiates auto square off for the open positions at the available price. The broker also charges a penalty as auto square-off charges for each trade squared-off. The auto square-off charges vary for each broker (ranging from Rs 20 to Rs 50 per order).

Note: Auto Square off timings range for different brokers.

Auto Square-off Timings (Standard)

Segment Timing

Equity

Before 3:00 - 3:20 PM

F&O

Before 3:00 - 3:25 PM

Currency Derivatives

Before 4:30 - 4:45 PM

Commodity

25-30 minutes before market close

MIS order charges

You need to pay brokerage as applicable for intraday trading when you use the MIS code for trading.


2. CNC Product Type

CNC stands for Cash and Carry. CNC product code is used when an investor intends to take the delivery of stock and hold the security till desired. CNC is applicable only for the Cash Equity segment. You can only do delivery-based trading using CNC in Equity. There is no leverage or exposure available for CNC product code. You are required to maintain the entire trade value as the upfront margin before placing orders using the CNC product type. You can place a CNC sell order only when you have securities in your Demat account.

Benefits of CNC order

  • Beneficial for a long-term investment with low or no brokerage charges.
  • No risk of intraday losses. You can hold the stocks and sell when you get a better price.
  • No risk of auto-square/charges.

Limitations of CNC order

  • No leverage available. Thus, need to maintain 100% of the trade value as margins.
  • Need to pay Demat debit charges (as applicable) for sell transactions.

CNC Order Charges

You need to pay brokerage as applicable for Equity delivery trading when you use CNC code for trading. Many brokers like Zerodha, Paytm, Angel Broking, ProStocks, Tradingo, etc. offer brokerage-free Equity delivery trading.

It is important to note that when you buy and sell the same stock the same day using CNC product code, it gets considered as Intraday trade, and thus the brokerage gets charged as applicable for Equity intraday.


3. NRML Product Type

NRML stands for Normal order or Normal margin. NRML product code is used when an investor intends to take overnight positions in F&O, Currency, and Commodity segment. You can carry forward the open positions and hold them till expiry using the NRML code. There is no leverage available for NRML orders. The trades with NRML codes do not get auto-squared off.

Benefits of NRML order

  • Positions do not get auto squared off.
  • Positions can be held till expiry or can exit earlier as desired.

Limitations of NRML order

  • No leverage for NRML orders.
  • Possibility of physical settlement in case of F&O positions held till expiry.

NRML Order Charges

The NRML order charges include the brokerage as applicable for Futures and Options, Currency, and Commodity derivatives. The brokerage charges for the Derivatives segment do not differ for intraday or overnight trading. For futures, brokers generally have a flat fee model or transaction value-based brokerage and for Options, some brokers may have a per lot basis brokerage model in addition to the above.


Product Type Example

Scenario 1: If you have Rs 5,000 in your trading account and intend to trade more than the available amount, you can use the MIS product type that gives you leverage to take positions for the extra amount. Using MIS code, you can buy 100 shares @ Rs 60 each. You can then place a sell MIS order at Rs 65 to book a gross profit of Rs 500. But, if the price does not reach the expected level, you should exit the position before the auto-square time at the best available price that may result in loss or earn a marginal gain. However, if you do not close the open MIS position, the broker RMS system will initiate the auto square and charge a penalty of Rs 20 to Rs 50 for each trade squared off.

Note: Each broker provides a different leverage margin (capped up to a maximum of five times). Check with your broker for the leverage offered for MIS orders.

Scenario 2: If there is Rs 5,000 in your trading account and you expect a stock trading at Rs 100 to give handsome returns after six months or a year, you can place an order up to a maximum of 50 shares using the CNC order type. Using CNC product code can save you brokerage if your broker offers brokerage free Equity delivery trades. You can also exit the position on T+1 (if your broker allows) if you are happy with returns.

Answered on

Frequently Asked Questions

  1. 1. What is the MIS order in the stock market?

    MIS order stands for Margin Intraday Square off order used for intraday trading.

    The MIS orders need to be squared off on the same day of purchase or sale. If the investor does not square off the order or convert it into other order types, the broker automatically squares off the order by the end of the trading session with some charges. Brokers also provide leverage to investors for MIS intraday trading through which they can trade in stocks beyond the available money in their trading account.

    MIS trading can be done by selecting MIS as product type during buying or selling a security.

     

  2. 2. What is a CNC order?

    CNC stands for Cash and Carry order, used to take delivery of stocks in the Cash Equity segment. CNC order is also known as Delivery order.

    There is no leverage available in this order type, and the traders need to maintain the entire value of the shares purchased as up front margin. The shares purchased under this order type can be held in the Demat account till desired for weeks, months, or years. You can also sell the stock the next day (T+1) using CNC product type if your broker allows BTST trading.

    You can also purchase and sell a stock on the same day using the CNC order type, but the order gets treated as an intraday order and attracts intraday brokerage charges.

     

  3. 3. What is the NRML order?

    NRML is the Normal Margin order used for overnight trading in the F&O, Commodity, and Currency Derivatives segment.

    NRML orders are used to carry forward the positions. These orders do not square off automatically and expire/square off only when the contracts expire or when you choose to exit the position.

    You do not get any leverage for trading in NRML derivative orders.

     

  4. 4. What is NRML margin?

    NRML margin is the Normal margin required to take an overnight position in the Derivatives segment.

    NRML margin is the margin requirement while placing orders using the NRML product type. You do not get any leverage using NRML product code. Thus, you need to maintain the exchange mandated margins to carry forward your positions.

     

  5. 5. What Is the Difference between CNC and MIS order types?

    CNC and MIS are the product types used while placing trade orders that specify whether you are doing intraday trading or taking delivery of the stocks.

    Difference between CNC and MIS

    CNC MIS

    CNC stands for Cash and Carry.

    MIS stands for Margin Intraday Square off.

    CNC is used for delivery trading.

    MIS is used for intraday trading i.e. buying and selling the same stock same day.

    Applicable only for Cash Equity segment.

    Applicable across all segments i.e. Equity, F&O, Currency, and Commodity.

    No leverage available for CNC orders.

    Leverage up to 5x times available for Equity MIS orders.

    No short selling allowed using CNC product type.

    You can short sell using MIS product type provided you square off the position the same day. You cannot convert it to CNC product type unless you have stock in Demat account.

    Lesser brokerage for CNC orders. Some brokers also offer free Equity delivery trading.

    Higher brokerage for MIS orders compared to CNC orders.

    No risk of auto square off for CNC orders.

    MIS orders carry the risk of auto square off with charges if not squared off within specified time.

    Lesser or no risk of loss in case you have holding capacity.

    Risk of loss if the price goes in unfavourable direction during the day.

     

  6. 6. What Is the Difference between NRML and MIS order types?

    NRML and MIS are the product types used while placing trade orders that specify whether you are doing intraday trading or taking an overnight position.

    NRML Vs MIS Order Type

    NRML MIS

    NRML stands for Normal order.

    MIS stands for Margin Intraday Square off

    NRML is used to take overnight position or to carry forward the positions

    MIS is used for intraday trading i.e. buying and selling the same stock same day.

    Applicable only for F&O, Currency, and Commodity segment.

    Applicable across all segments viz. Equity, F&O, Currency, and Commodity

    No leverage available for NRML orders

    Leverage up to 5x times available for Equity MIS orders

    NRML positions can be held till expiry.

    MIS positions need to be closed the same day.

    NRML orders do not get auto squared off.

    MIS orders carry the risk of auto square off with charges if not squared off within specified time.

     

  7. 7. Can I convert MIS to CNC order?

    Yes, you can convert an MIS order to a CNC order in the case of the Cash Equity segment.

    To convert a buy MIS order to CNC, you need to have sufficient margins in your account to cover 100% of the transaction value. If it is a sell MIS order, you can convert it to CNC only when you have that stock in your Demat account of the same or more quantity.

     

  8. 8. Can I convert NRML to MIS?

    Yes, you can convert an NRML position to MIS.

    Once you convert the NRML position to MIS, you need to square off the open position the same day, failing which the broker will auto square at the available price with additional charges.

     

  9. 9. Can I convert CNC to NRML?

    No, you cannot convert a CNC order type to an NRML order.

    CNC order is applicable for the Cash Equity segment whereas, the NRML order is for the Derivatives segment. Hence, since both product types are for different market segments, it is not possible to convert CNC orders to NRML. However, you can convert a CNC order to MIS and square off the position the same day.

     

  10. 10. Can I convert Bracket order to CNC?

    No, it is not possible to convert the Bracket order (BO) to CNC.

    Bracket orders are a specific type of advanced orders meant only for intraday trading. The bracket order needs to be squared off on the same day whereas, the CNC order is designed to take the delivery of the stock.

    Bracket orders combine initial order, stop-loss, and target order to help traders place a safe order with pre-decided stop loss and target exits in intraday trade positions. These features are not a part of the CNC order.

     

  11. 11. Can I convert Cover order to CNC?

    Cover orders are intraday orders and cannot be converted to CNC.

    Cover order is a multiple-leg order with stop loss and entry price in one order. A CNC order does not have the features to set the stop loss. It is a single-legged order meant for delivery-based trading.

    A cover order by its nature is required to be squared off the same day and thus cannot be converted to CNC.

     

  12. 12. What are the charges to convert intraday to delivery order?

    There are no charges to convert an intraday order to a delivery order.

    To convert an intraday order to a delivery order, you need to have sufficient funds in your trading account to accommodate 100% of the trade value as upfront margin in case of a buy trade. If the open intraday position is a sell transaction, you need to have the required holdings in your Demat account for the said stock.

    You need to pay brokerage charges and other regulatory charges as applicable for a CNC order.

     

  13. 13. Can I use CNC for Intraday?

    Yes, you can use a CNC order for intraday trade. However, in such cases, you will not get any leverage for trading and the brokerage will get applicable as required for intraday trading.

    If you convert the CNC to MIS, you will have to square off your position before the stipulated time, failing which, it will get automatically squared off by your online broker with some charges.

     


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