BTST trades or BTST stocks enable a trader to profit on momentary volatility. Investors can buy today and sell tomorrow in this kind of deal. They can also sell the shares they’ve bought before they’re delivered to their Demat account. Therefore, they have the opportunity to sell the shares before they are transferred to the Demat account.
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What is BTST and How does it works?
The shares you purchase under an equity delivery order, credit into your Demat account in T + 2 days. T here denotes the day on which you purchase the shares. Additionally, the seller gets the credit in his account in T + 2 days.
You cannot sell the shares to make a profit during this time because the order is normal, even if the value of the shares you bought increases. On the other hand, if you place a CNC or cash and carry order, you can sell the shares as soon as you see a rise in their value to record profits.
Features of BTST Trades
- You can sell equities using the BTST feature before they are credited to your Demat account. After the buy order, you have up to two trading days to execute the sell order. By the third day, the shares are credited to your account, at which point you can make a routine sell order.
- BTST trading is a special facility provided by a select few stockbrokers in India.
- Only scripts that have been approved by the brokerage may be used with the BTST feature. So that you can only make transactions on approved BTST equities, so request from your stockbroker that they supply the necessary information with you.
- For SME businesses, many brokers do not provide BTST trading.
- The BTST capability is not available for equities in the T2T sector. It is because it is mandatory to take delivery of Trade to Trade Segment stocks.
- There are no complex steps or special order types to complete BTST trades.
Advantages of BTST Trading
A trader can enjoy some benefits with BTST trades. These are:
- One can benefit from the stock market’s short-term volatility by using BTST transactions.
- When engaging in BTST trading, shares are sold before being deposited with the DP. You are therefore exempt from paying any DP fees.
- You can convert an order into a BTST and decide to sell it the following day if you make an intraday deal but do not anticipate making any money before the market closes.
Disadvantages of BTST trading
BTST trades also carry some risks. Some of them are:
- You will be required to pay a margin penalty on BTST trades if your account does not have a sufficient balance.
- Many stockbrokers don’t provide the BTST service. Instead, they carry out business using CNC. As a result, you will need to pay CNC order fees, which vary depending on the broker.
- If the seller defaults to deliver the shares on the settlement date and you fail to deliver the shares for your sell order, you will have to pay the penalty. Therefore, before you indulge in BTST transactions, ask your stockbroker about the penalties for short delivery.
BTST Charges
There are two ways in which BTST charges are calculated.
- Brokerage fees for BTST on the Trading Day :- An intraday trade is one in which you buy and sell BTST stocks on the same trading day. As a result, your broker will charge you for intraday trading.
- BTST brokerage fees for days T+1 or T+2 :- The broker assesses equity delivery brokerage fees if you purchase the shares on a specific trading day and sell them the following day or the day after. However, certain stockbrokers provide brokerage-free equity delivery, therefore trading BTST does not require any brokerage fees.
Please be aware that depending on your brokerage plan and when you sell the shares, some stockbrokers in India incur various BTST brokerage costs. In order to avoid these fees, consult your stockbroker before making any decisions.
Summary
Trading BTST involves a lot of practise and expertise. Before making the trades, you must have a sound plan to prevent errors and guard against suffering losses. However, the majority of traders frequently complete profitable BTST trades. They regularly acquire stock soon before the market closes and sell it the following day.
FAQs on BTST trading:-
BTST stands for Buy Today, Sell Tomorrow in trading. The facility allows traders to sell the shares before delivery, which means they can sell them even before the shares are credited to the Demat account.
In regular trading, shares take T + 2 days to get credited to a trader’s Demat account. T refers to the day of order execution. It is not possible to sell the shares before delivery. But, the BTST trading facility allows you to sell shares on the same day or with T + 2 days. As a result, traders can earn profits from the short-term price surge in stocks.
The full form of BTST is Buy Today, Sell Tomorrow. On the other hand, STBT stands for Sell Today, Buy Tomorrow. BTST stocks are bought on T-day and sold even before they are credited to the Demat account on T + 2. In STBT trading, investors can sell the shares before buying them. The BTST facility is provided by a few reputable brokers in India. However, STBT is not provided by any broker since short selling is not allowed in the Cash Equity segment.
BTST allows you to sell the stocks on the same day or the next day. In Day Trading, you need to sell the stocks on the same day.