Cover order is a high leverage feature for intra-day traders to take advantage of high margin trading exposure with safe and controlled risk. Cover order is a set of two orders placed simultaneously. Cover order is currently enabled for NSE Cash, NSE FNO and NSE Currency segments.
- 1st leg – Market Order
- 2nd leg – Stop Loss trigger pending order (Market Order)
In case of Cover Order first order is always a Market Order and its corresponding 2nd leg Stop loss trigger pending order also placed simultaneously and sits in the order book. And the stop loss order is compulsory. Once the price touches the stop loss trigger price, 2nd leg order will be executed as market order.
Cover orders can be used to execute trades with better risk-reward ratio, where you want to limit your potential trading losses and allow the profits to run. Cover Orders enable traders to maintain their trading discipline. Traders can take advantage of the margin benefits as well, using the Cover Order facility to leverage their positions greatly while enjoying the benefits of a stop loss to protect them from any potential downside risk.
Cover order provides increased leverage compared to MIS orders. You get upto 20 times for equity, and upto 7 times for F&O. Cover Orders are designed only for Intraday
How the Margin Required for Cover Order is calculated
Margin Requirement depends upon three factors.
- Current Market Price
- Stop Loss Size
- Trading Lot Size
Generally margin comes around at 1.5% of the contract value.Let's say Nifty is at 7800 then the one contract value = 7800x75 = Rs5,85,000.
Hence you require a margin range between Rs.8,775. As long as your stop-loss is less than 117 points in Nifty Future you require a minimum margin of Rs.8,775/-.
Cover orders are currently available in the following platforms.
- Nest Trading Terminal (Desktop)
Cover orders can be placed only during regular market hours and cannot be placed during the pre-market trades.
How to Place the Cover Order
To Place Buy Cover Order Entry press Shift + F1 (Nest Terminal)
To Place Sell Cover Order Entry press Shift + F2 (Nest Terminal)
Or right click on the scrip to select Cover Order Entry (Nest Terminal)
Remember that all the Cover orders will be squared off automatically by 3.15p.m in case of NSE Equity, NSE FNO trading segments.
Once the Cover order gets executed, positions can’t be exited partially and the only way to exit positions from your Order Book (F3) is by selecting the pending Stop Loss order and clicking on “Exit”.