While trading in the stock market, you might have encountered certain instances where a few stocks aren’t available for intraday. In this article, we will discuss Why Some Stocks Are Not Available For Intraday?
There are two types of intraday orders – MIS & CO. Since these orders allow you to trade with more funds than what you have in your trading account (leverage), a higher risk is associated with them.
A stockbroker may need to restrict intraday orders for some stocks based on regulatory or risk management reasons. You will only be able to place delivery (CNC) orders for such stocks.
What is Co and MIS?
Before understanding the reason for non-availability of the stocks for intraday trading, let us understand what is CO and MIS
The Margin Intraday Square-off (MIS) is a type of order in the stock market that allows you to take trades within the day along with leverage. This order has to be compulsorily squared-off by the end of the day.
Cover order (CO) is a type of of MIS order where you can place a buy/sell order which can be either market or a limit order and it will be accompanied by a compulsory stop-loss order.
Why Are Intraday (MIS/CO) Orders Not Allowed For Some Stocks?
Intraday orders can be blocked if the risk of not being able to exit the intraday position is high, which can result in a short delivery in some scenarios. Here are a few reasons intraday orders can be blocked:
If the markets are volatile, specific intraday order types may be blocked. This ensures that traders don’t lose more money than what is available in their accounts and create a large credit risk to the broker.
2. Low Liquidity Or Volume
If there are low volumes in a particular share, there is a high chance that it may get blocked for Intraday orders because retail traders might get lured into these kinds of scrips.
Usually, scrips with low volumes have a higher chance of pumping and dumping as these scripts are easier to operate.
3. Circuit Limit
Circuit limits, i.e. price bands, are safeguards set by the exchange to prevent large movements in the price of stocks in a very short time.
When the price hits the upper or lower circuit limit set by the exchange, orders will remain pending at that circuit price for that particular stock or contract.
The price band is the price range within which the stock can be traded for that day. The circuit limits vary from 2 to 20% depending on the liquidity, volume, and category of the stocks.
If the price hits the upper circuit limit then all the orders will remain pending as bids at the upper circuit and there will be no sellers or offers in the market for that stock.
If the price hits the lower circuit limit then all the orders will remain pending on the offer side at the lower circuit, and there will be no buyers or bids in the market for that stock.
4. IPO Listing Day
Usually the day a company’s IPO lists on the stock exchange, intraday orders may be blocked as volatility in that stock might be high.
5. High Margin Requirements
Another reason a stock might get blocked for intraday is if the stock has a high margin requirement and intraday trading may attract a margin penalty.
6. Penny Stocks
If the stock is in a category where regulations don’t allow intraday trading. These stocks usually are penny stocks and don’t have very high liquidity.
These were some of the reasons why certain stocks are not available for intraday trading. This is mainly done for the safety of retail traders so they don’t get stuck in illiquid stocks and can focus on good stocks with high volumes.
So that’s all for the article on Why Some Stocks Are Not Available For Intraday, We hope you enjoyed reading it. Happy Investing!
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