BTST Buy Today Sell Tomorrow is a very popular trading practice in the Indian Stock Market. This trading methodology is used to seize the overnight price fluctuation in stocks. The reverse form of BTST is STBT that is Sell Today Buy Tomorrow.
Understanding BTST Tips
BTST is a facility offered by most of the stockbrokers in India where you can buy a stock today and sell it tomorrow before you get the delivery of the shares. Using this practice has its own benefits and issues and you need to know the equity settlement period before you go ahead.
Suppose you buy 10 shares of XYZ company on Monday you would get delivery (getting delivery means that the stocks will be credited to your demat account) from the exchange that is NSE or BSE on T+2 i.e Wednesday. Ideally, you should be able to sell the shares only if the shares get credited to your demat account but you can use the BTST facility to sell the shares before that. So if you see any favourable price movement on next day (T+1) and you would like to use the opportunity to sell the shares, you can sell the 10 shares of XYZ on Tuesday. This buying of stock and selling it the next day is known as BTST ( Buy Today Sell Tomorrow )
Also note that Saturday/Sunday/Public holidays are not considered for delivery, so for a stock bought on Friday, you will get delivery only on Tuesday evening (Friday is T day, Monday is T + 1 day and Tuesday T + 2 day).
How to do BTST trades ?
- Cash Segment
BTST trades can be made in both cash and futures segment, however STBT trades cannot be made in the cash segment. In this is you have the flexibility of exiting anytime after buying the stock.Whenever you do BTST, you do not have to pay any DP charges. DP (Depository Participant) charge is the amount you need to pay whenever stocks are debited from your demat account.
- Futures Segment
In the Futures Segment BTST trades can be easily done as delivery of shares does not take place in Futures segment. Huge profits can be made even if the share price moves even by a small amount in the favourable direction as in Futures you need to buy shares in lots instead of single shares. STBT trades can be made in the futures segment.
How to get BTST tips ?
You get the best BTST stock tips by joining Stocks Fetcher Premium. Each recommendation has the target price defined along with a precise stop loss. Only highly liquid stocks are recommended based on chart pattern formations, technical analysis, volume analysis as well as fundamentals.
Risk of BTST Trade
The most crucial thing to know about BTST trades is about the risk involved in it. There is risk of short delivery in BTST trading. Short delivery occurs when the person from whom you bought shares does not deliver the shares to you. There could be numerous reasons for this such as the other person might have shorted for intraday and did not cover his positions, stocks hitting upper / lower circuits or some other reasons. Now as you have bought the stock the role of the exchange is to give it to you. For fulfilling your requirement the exchange organises an auction on the T+2 day (between 2pm to 2.45pm) and buys the share which the other person defaulted to give you and these shares are credited to your demat account on T+3 day. The other person is then charged with an auction penalty.
So what is the problem for you incase of short delivery ?
So if you had bought shares on Tuesday and you sold them on Wednesday, so you assumed that the person selling you shares on Tuesday will deliver it to you on Thursday (T+2) evening and what you are selling on Wednesday will be adjusted with stocks you receive on Thursday. But unfortunately you had a short delivery, so on Thursday evening you don’t have any stocks, so what happens is that on Friday when you are supposed to deliver the stocks, you don’t have any (stocks from auction will come to you only on Friday evening, but what you sold on Wednesday has to be given to the exchange latest by Friday morning). When you default, the exchange puts that auction penalty on you.
It is highly probable that you are confused at this point because all this information is counter-intuitive & unlike anything you might have experienced before. Just go through it one more time and it will be clear.
Tips for BTST Trading
- Initiate the trade having a stop loss placed.
- Follow the decided stop loss.
- Avoid it whenever some major event is expected to happen overnight
Also read about Best Tips for Investing in Stock Markets
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