What is MIS order?
MIS is Margin Intraday Square Up. These orders are purely intraday orders and need to be squared off during the same trading day. Now intraday is not just the buying part, it also includes the selling part. It not only includes buy and sell but you can also sell and buy the same day. So whether you buy or sell or sell and buy you need to complete the transaction before the closing time of the market. If you buy a product in intraday, you need to choose MIS in order type.
MIS orders are solely intraday orders and need to be squared off during the same trading day
MIS involves buy and sell / sell and buy
In the derivative segment which is F & O, you will have only NRML and MIS options enabled.
SPAN Margin, Standard Portfolio Analysis of Risk is a technique for measuring portfolio risk.
Optimal Utilization of exposure limit
How to place an MIS order in Erich Web hunt?
Now you can see the Web hunt application of Enrich on the screen. I choose a commodity product. I have selected the April Future of crude oil.
Now I click buy, it immediately shows two options. MIS and NRML; now before choosing you need to know what is MIS? MIS is intraday trading and if you need to take delivery you have to choose NRML but in equity segment you will have CNC and MIS. But in the derivative segment which is F & O, you will have only NRML and MIS options enabled.
Now I choose MIS…and I choose the required quantity….you can see that the market price is reflected here…now I click buy…now my trade has been executed.
Now when you place an order in MIS, what you need to understand is whatever position you take in intraday will automatically be squared off 15 minutes before the market closes, without your knowledge. For instance, equity market closes at 3.30 pm, by 3.15 all intraday positions will get squared off. So, you need to be careful while buying in MIS and close your positions before the stipulated time frame. If you do not close within the time frame, then the RMS system will automatically square off the position with whatever is the price at the time of closing.
Likewise there are some benefits while using MIS order, you can use exposure limit or leverages. What is an exposure limit? The additional amount that the brokerage firm provides you apart from the amount you have in hand is the exposure limit. You can use this extra amount for intraday trading. But the exposure limit in each product varies. Commodity and equity market provides 15 times exposure limit, option trading provides only 3 to 5 times exposure limit…so limit varies in each segment…you need to trade based on these limits.
How to calculate exposure limit?
For instance, I have invested 10,000 rupees, and the broker gives my 10 times exposure limit, which is , 10,000 x 10 times…so now you can purchase shares or stocks for up to 1,00,000rupees.
The point is because you can buy and sell and also sell and buy on the same day in intraday, it isn’t very risky for the broker to give you an exposure limit. But, you must be careful while using the exposure limit.
Now if you have to know what an exposure limit is, you need to know what is span margin?
SPAN margin originated its from SPAN i.e. Standard Portfolio Analysis of Risk which is a technique for measuring portfolio risk. In Indian stock markets, SPAN margin is also generally referred to as VaR margin or initial margin which is the minimum margin requirement for initiating a trade in the markets.
The SPAN margin is typically different for every security depending on the nature of risk of the security. For Example, the SPAN margin prerequisite for an Index will be lower than the SPAN margin requirement for a single stock since the risk of portfolio/index is usually lower than that of a specific stock or security. So an presumption can be drawn, that lesser the volatility, lower the SPAN and higher the volatility, higher the SPAN margin prerequisite.
Let’s see where you can check the span margin. If you get into Enrich website, you will see an option called support. If you click this you can see span margin. You will be able to view the span margin of all products like MXC, NSE. Here I’m selecting crude oil, now you see the April month contract of crude oil…you can see that it’s span margin of today’s price…now this price may vary tomorrow …. rupees to buy one lot of crude oil.
Span Margin displayed in Enrich Website:
Check the Exposure Limit in Enrich Website
Now this span margin is for one lot…but what happens if the company gives you ten times exposure limit, you can buy a lot with just 10,000 rupees in intraday…the span margin is used for delivery purpose..you can use the exposure in intraday…. the point to note here that you are buying product worth one lac for 10,000 rupees…so you need to be aware of its risk factors as well. That is why when you use your exposure limit in intraday; you need to be very careful.
Likewise you can buy a product in intraday and convert it to delivery..for this when you select the order book in your trading terminal, you will be able to see the various live orders…here you can choose the product and right click to convert option…for instance if it is equity segment you need to convert from MIS to CNC…likewise the derivative segment…if it is F& O you can convert it from MIS to NRML. But, like I said before.. all these conversions should take place before the market closes or before the square off timing. As said before equity market closes at 3.30, and 3.15 is the intraday square off time…so your conversions must take place before 3.15, if not it will be automatically squared off at 3.15.
So, make sure select carefully if it is MIS or NRML when you place an order in the market. By now I hope you are clear about what is MIS order. If this video has been useful, please do like, share and subscribe. If you click the bell button below, you wil receive a notification whenever we update new videos.
How do we use exposure limit and strategy to minimize loss?
For instance, I buy a product in the market, unexpectedly the market goes down, here I would incur a loss, but I also know that the market will pull back again. So what should I do to minimize my loss? When the market goes down, I can buy an average in the downside, but I need to have a margin availability to buy the average….however what would happen if I had used up my entire exposure limit in my initial trade? Neither will I have margin availability nor will I be able to make the average trade. So when you face such a situation, you can use the exposure limit as an intraday strategy. Remember never to use up your entire exposure limit while trading. It should only be used as a supplementary fund to support you when you are in need of extra funds.
The safer thing to do is to close off your position before the square off timing. Point to note is all India square off timing is the same, and when the auto square off takes place, price fluctuation would be high in the market.
This could eventually lead to a huge loss in your positions. As it is an automated square off process it would square off at the market price. Because there’s a possibility of huge loss in such cases, some brokers make additional charges for the auto square off.
Likewise there is a risk of trading with the exposure limit. For instance, you have 10,000 in hand and you have taken position for 1, 00,000. Now if you or the broker is unable to square off the position because of some reason say internet failure or server issues ….that position will be automatically carried forward.
Here the broker isn’t responsible. As a result, if you carry forward without fund in hand, you would incur a penalty the following day.
Sometimes price movement may be high during the square off timing, and if the square off happens at this time, there may be possibility of incurring a loss beyond the funds that you have in hand.
This amount that goes into debit must be repaid by you. So the point to note here is that all the positions in intraday must be closed before the square off timing.