What is the meaning of What is the meaning of Square Off in trading? In trading ter... More in trading?
In trading terminology, What is the meaning of Square Off in trading? In trading ter... More or squaring off a position means making a trading position net-zero by taking the reverse trade. Or in other words, you close your existing trading position.
In most cases, What is the meaning of Square Off in trading? In trading ter... More is the term used for intraday trading of shares or derivative trading.
You, as a day trader, bought 100 SBI shares around 9:30 AM. Then around 11:30 AM or 2 PM, you see that the price is up by 10-12 points. Now, you can sell at this higher price to book your profit. This selling of your trading position is called squaring off.
For example, in futures, if a trader is long in Nifty (NSE) futures at 9250 at 1 lot, then, to book profit, he sells the Nifty future at 9300. When he sold the Nifty future, his net position in Nifty future becomes zero. This is What is the meaning of Square Off in trading? In trading ter... More.
Frequently Asked Questions
What happens when I don’t square off my position?
If you don’t What is the meaning of Square Off in trading? In trading ter... More your position, then your trading position is settled. This means, if you have bought futures of stock, then on the expiry of the contract, it will be physically settled and you will have to take delivery of those shares (equal to lot size) by paying full price.
If you shorted a stock, then you have to deliver those shares on the settlement.
What happens if you don’t What is the meaning of Square Off in trading? In trading ter... More intraday?
Just like the example above, if you don’t What is the meaning of Square Off in trading? In trading ter... More your intraday position, then it is considered as normal trade and dealt accordingly.
This means, the in cash intraday buy positions, the share will be considered as bought for delivery and you will have a margin shortage the next day. You will need to deposit the full amount equal to buying those shares to clear your margin shortfall liability.
In case you have shorted the shares and didn’t clear you position by the end of the day, it is a little more difficult. In such a scenario, if you don’t have those shares in your Demat account, then it leads to short delivery and it goes to auction. In the auction, shares are bought at whatever cost available and you need to pay the difference.
What is the square time of Zerodha/Upstox?
In case of discount brokers like Zerodha/Upstox, the cut off time for squaring off is normally 3:20 PM. If there is any change, it is notified by the broker on their terminals. In the case of normal brokers, they have timings of What is the meaning of Square Off in trading? In trading ter... More from 3:15-3:25 PM.
This cut off time of squaring off, of intraday positions, depends on the volatility of the market & technical factors.
In April 2020, Zerodha levied an extra charge of ₹ 50 for automatic What is the meaning of Square Off in trading? In trading ter... More of intraday positions by RMS. This move was aimed at traders who keep their positions open until the last moment of the trading day. This leads to a surge of orders in the last few minutes leading to failure of orders in certain cases.
What is What is the meaning of Square Off in trading? In trading ter... More in delivery trading?
Though this term is mainly used for intraday or futures & options trading, sometimes it is also used for delivery trades. In such a case, usage of this term refers to cases when a stock position in cash was taken to benefit from a small timeframe like 2-4 days. And then the position is cleared.
Few brokers allow margin trading for the time period of 5 days and these trades refer to such time frame only.