Introduction to Cover Orders

A Cover Order is a special type of order through which the user can take an intra-day position and take advantage of extra exposure while being protected through a stop loss order. Here is how it works.

The system will place two orders simultaneously: a market order and a corresponding stop loss market order which would only get triggered at the specified stop loss trigger price. If the trigger price is hit, the stop loss order gets executed as a market order. The combination of both these orders being placed simultaneously is known as a Cover Order. Cover Orders help you limit any potential losses that could be incurred on a position.

Benefits of Cover Orders

Limited Risk and Maximum Profit: Due to the inherent way Cover Orders work, they help traders minimize downside risks and provide better control over risk management. Since there is always a stop loss corresponding to each trade, Cover Orders can help users trade in a more disciplined manner. Users 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 downside risk. Overall, Cover Orders reduce downside risk but do not impose any limits on their returns. This is a classic example of a win-win situation.

How Cover Orders Work:

  • A Cover Order is basically a two legged order. The client needs to place a buy/sell order with compulsory corresponding stop loss order in the opposite direction.
  • The first entry order will always be a market order.
  • The corresponding stop loss order will sit in the order book as a Stop-Loss trigger pending order; once the trigger price hits the stop loss limit price, it gets triggered as a market order.
  • The trigger price range will be defined daily and the client must place the stop loss order within the specified range. For example, suppose Reliance Industries is trading at Rs. 900 and the range is specified as 10%. In this case the client can specify the Stop Loss order between the price range of Rs.810 to 990 as the trigger price.
  • Once the Cover Order has been placed and the first leg has been traded, the client will not have the ability to cancel the Cover Order. The client can only exit the current one sided position.
    • In the very rare case in which the first order is an open order pending at the exchange and has not been traded, the client can cancel the Cover Order.
    • The stop loss order can be modified within the stipulated price range. After the order has been modified, the margin will be recalculated.

How to Place Cover Orders

Executing a Buy Cover Order Entry: The client can execute a buy Cover Order from the Orders and Trades menu. The client can also execute a Cover Order entry from the Market Watch screen by utilizing the keyboard shortcut Shift+F1 for the script he wants to trade.

Executing a Stop Loss Sell Order: After placing a buy Cover Order, a stop loss sell limit order will be placed. The stop loss buy order trigger price must be within the range that is displayed on the trigger price range box. The Trigger Price Range is the Last Traded Price + Trigger Percentage of the LTP price.

CoverOrder1

Executing a Sell Cover Order Entry: The client can execute a sell Cover Order from the Orders and Trades menu. The client can also execute a Cover Order entry from the Market Watch screen by utilizing the keyboard shortcut Shift+F2 for the script he wants to trade.

Executing a Stop Loss Buy Order: After placing a sell Cover Order, a stop loss buy limit order will be placed. The stop loss buy order trigger price must be within the range that is displayed on the trigger price range box. The Trigger Price Range is the Last Traded Price + Trigger Percentage of the LTP price.

CoverOrder2

Modification of Cover Orders:  After a Cover Order is placed, the client can see the Stop Loss pending order from the order book. The Client can open the order book from the order and trades menu. The client can also use the shortcut key F3 to open the order book. Modification of a stop loss order is allowed up to the stipulated trigger price range.

Cancellation of Cover Order: Cancellation is not allowed for Cover Orders.

Exiting a Cover Order position: Exiting a cover order position will place a market order in the opposite direction for the first leg. Once the order has been executed, the stop loss order will automatically get cancelled. The client can only exit the position by pressing the exit button from the order book after selecting the order he wishes to exit. The exit button is located at the bottom of the order book.

CoverOrder3

Example of a Cover Order: Nifty Futures

A client places a buy Cover Order on NIFTY FUTURES where the LTP of NIFTY is 6200. Therefore, he would be allowed to place a stop loss order in the range of up to 5 % below 6200; i.e. 5890.

The margin calculation will be the higher of:

  1. Price difference % between Leg 2 SL order and Leg 1 LTP * 1.5
  2. Min Margin % of the value traded

The applied margin is as displayed below for different stop loss prices. (Min margin % is 2.5% for NIFTY Futures).

Sell SL Range
SL PriceMargin
61507827.5
61007827.5
600015000
590022500
5800Not Allowed

Example of a Cover Order: Equities

A client places a buy Cover Order on INFY where the LTP of INFY is 3665, and he would be allowed to place a stop loss order in the range of up to 10 % downside; therefore, he can place he sell stoploss at a price of 3482 or above. The applied margins are as displayed below for different stop loss prices (Min margin % is 5%).

Quantity (in shares)Sell SL Range
SL PriceMargin
100360018325
100355018325
100350024750
100340039750
100330054750
1003250Not Allowed

Downloading Margin Files

Margin files are updated daily here.

Puneet Maheshwari

Puneet Maheshwari

Puneet holds a MBA (Finance) degree. He has worked with various options traders and helped them build customized strategies through the use of automated trading. In his free time he enjoys playing cricket, billiards, and cooking.

  • Vineet

    Are these cover orders available on RKSV NEST mobile app? If not, when can we expect the same. Thanks

    • Puneet Maheshwari

      Dear Vineet,

      Cover order is not available on mobile app, development is going on it will take some time.

      Thanks

      • Abhay Kumar

        Cover order facility is already available with some brokers. What we are lacking here is a parallel target order. Say we take a nifty long position at 6200 and SL at 6150, we, also, place a target sell order for 6250. Once either of SL or target order is executed, the other order is automatically cancelled. Facility alraedy available with some of the brokers. Can we expect the same here in future?

  • Vishal Jain

    This facility seems great as it saves a lot of time in placing multiple orders. I have a little confusion regarding the “EXIT” of the cover order. I understand that EXIT option is for square-off of the existing first leg in the cover order. Suppose I have an executed Buy Cover Order for which the Sell Stop Loss order is pending. If I want to square-off my Buy position, should I select the executed Buy order in the order book and press EXIT or select the corresponding pending Stop Loss order and press EXIT.

    Thnx.
    Vishal

    • Puneet Maheshwari

      Dear Vishal,

      Your understanding is correct, you need to select the corresponding pending SL order from the open order book and then press exit. It will automatically cancels your SL order and square off the first leg order.

      Thanks

  • manjunath

    in the nse futures pdf, what does intraday limit 10 times and cover order 20 times and all mean. Does it mean in cover order, you can buy 20 lots with normal exchange margin wherever applies?

    thanks

    • Puneet Maheshwari

      Dear Sir,

      Cover order is currently active for cash and futures segment. I will explain you with example that how the margin is calculated.

      For Futures : Nifty currently trading at 6300 and to take one lot of nifty delivery margin is approx Rs. 31,000 and intraday margin is approx Rs. 12,500, if you use cover order margin will be even lower which is approx Rs.7900 to purchase one lot of nifty. This means for intraday trading in futures you will be getting 4 times leverage. The only condition is that you need to put a compulsory SL order while taking the position as per the range defined in the system.

      For Cash (Equities) : Infosys is trading at 3665 and to take delivery of 100 shares you need margin of Rs. 3,66,500, for intraday you need Rs. 36,500 ( 10 times leverage), but the same order if you trade using cover order you will need only Rs. 18,325 (20 times leverage). The only condition is that you need to put a compulsory SL order while taking the position as per the range defined in the system.

      Thanks

  • Santosh Bhat

    Is facility available on now and NSE mobile?

    • Puneet Maheshwari

      Dear Santosh,

      This facility is only available on Nest trader.

      Thanks,

  • Ramamurthy Gopalan

    is the Cover order facility available in Nifty Options? ?

    • Puneet Maheshwari

      Dear Sir,

      As of now it is not available, we are working on the same, this will take some time.

      Thanks

  • yuvaraj.v

    The product is great…pl bring it to mobile platform as soon as possible…

    Rgds
    Yuvaraj

  • SHUBHAJIT RAKSHIT

    Great Work done from your end. Actually when I opened my trading account two month’s back,I given feedbck to start cover order facility(I used this facility before in edelweiss trading account)…now RKSV started….I hope in future RKSV should be role model for future stock broker’s…
    Your helpdesk platform is also great…..just need a better marketing strategy to capture Indian Retail Market…Best Wishes…

  • sudhir

    Good work , I like you to get implemented for Index and equity options also.

    secondly even this help, I need to see that you develop Stop buy/sell order
    with Trailing stops. with points that I can specify to trail.

    Further to that as I pyramid into say stop buy order all stop quantity should
    merge into one trailing stop order and trail within the limit points / percentage range
    you may have specify

    By the time you do that I request you to have Nest traders should allowed
    directly to linked with NinjaTrader then all order placing will be automatically
    taken care
    thanks
    Sudhir

    • Shrinivas Viswanath

      Hi sudhir,

      Cover order on options will come soon. We will also release it for currency derivatives soon.

      For an order + trailing stop loss, it’s not a cover order, it’s called a bracket order. We are working on getting it on our platform fairly soon.

      On NinjaTrader — yes we will send that info to our product team to see what they can do.

      Thanks!

  • Ganesh

    Why are cover order compulsarily market orders? Due to my work nature, I cannot be present infront of the system. I want to place a stoploss buy order alongwith with a cover sell order. Can you make that possible? I want my buy order to trigger when a specific price is reached and then only activate the cover stoploss order.

    Also, is there any problem with the web trading platform? It seems not to be working since I got this cover order email.

    • Shrinivas Viswanath

      Hi Ganesh,

      Thanks for your question. What you’re asking is considered “algo/automated trading” by regulations and can’t get approved by the exchange. What you can do in the meanwhile, is place an MIS order along with a stop loss order.

      Regarding the web platform, there are no errors on our side — can you shoot an email to support@rksv.in and we’ll take a look?

      • Ganesh

        Well, essentially, bracket order is what I am talking about. I have sharekhan tradetiger account as well, and they allow this trigger price option alongwith bracket orders option. So instead of market order, I can place a trigger price of my choice alongwith stoploss and book profit price.
        If you can get this into NEST then it will be helpful.

        Thanks.

  • DIPANKAR PURKAYASTHA

    Just Great work… We need it in NSE NOW mobile app please bring to that platform. We trade from NSE NOW mobile because we are serviceman so not possible from terminal please bring it quickly…

    • Shrinivas Viswanath

      Thanks for the comments! We’ll work on getting it on our mobile application soon.

  • TVBR RAJESH

    FINE COVER ORDER FACILITY, IS THERE ANY OPTION IN PLACING A ORDER AT DESIRED PRICE( NOT AT MARKET PRICE), SIMULTANEOUSLY PLACING PROFIT PRICE( IF DESIRED MP IS ACIEVED, DESIRED PROFIT PRICE OPERATES) ALONG WITH SL

    • Puneet Maheshwari

      You are asking for a bracket order. We are working on getting it on our platform fairly soon.

  • DIPANKAR PURKAYASTHA

    Sir can I get the facility of cover order in “call and trade” option?? If so then please give that facility because its not possible for every one to trade from Terminal.

    • Puneet Maheshwari

      Call and Trade is available for cover order, you can use this service.

  • farukh shaikh

    does it also places target order along with sl order in covered order ??

    • Puneet Maheshwari

      Target order is not allowed in cover order, you can only place SL order in cover order. Target order is allowed in bracket order. We are working on getting it on our platform fairly soon.

  • Trader’s World

    The second leg of Cover Order doesn’t get modified above buy/sell price. What’s the use of this then?

    • Puneet Maheshwari

      It is allowed to modify the SL order till the latest LTP, if you are not able to do it then please call our trade desk, they will help you.

  • SHOBHIT SONI

    I am very happy to know about cover orders. It is a great deal and supporting for small traders. I understood how to place cover orders but I got a prob that after placing a buy order at the 11100 and I want to square it off ; so how will it work?.

    Bought Bank nifty at 11100 and now it is 11150 and I want to sell at 11150. so I use Shift + f2 . thereafter do I have to do anything else. ?

    Will my position be all over ?

    Am I out of Market with no posiiton ?

    I dont know First leg or Second Leg ?

    • Puneet Maheshwari

      Thanks for the feedback, there are two option to square of the current position:

      1) You can modify the SL to Rs. 11150, only condition is LTP should be 11150 or higher.

      2) From order book select the trigger pending order and click on the exit button located in the bottom right side of the order book. This will cancel your SL order and sqr off your leg 1 position.

  • PANKAJ JOSHI

    Sir
    Thanks for providing the Cover Order Facility.
    I request you to kindly enhance the facility of Cover Order with Compulsory SL with Targeted Profit Price . Once the Targeted Profit Price is achieved and Buy/Sell order corresponding to the trade is executed the SL order should automatically cancelled. this facility will help those who can not sit in front of terminal all the day. Second You have mentioned in previous ex. that if Banknifty i bought at 11000 and now LTP is 11500 and i want to book the profit than SL should be modified to 11500 or less that LTP. But what about the condition when price falls down during placing or modifying the SL order

    • Puneet Maheshwari

      Dear Sir,

      Order itself first check the same on a real time basis and it will not allow to place the SL order if LTP is already below your entered trigger price.

      Thanks

  • Aman Khan`

    Sir, can i place cover orders for MCX Futures, Intraday ?? If No, when can i avail this facility on NEST Trader ??

    • Vaibhav Vora

      Cover orders in MCX futures are not available as of now

  • Tushar

    Do you provide cover orders in options. If yes for which contracts,expiry & at what strike price?

    • Vaibhav Vora

      Hi Tushar,

      Yes, cover orders are available in liquid options.

  • ranjan

    Dear Sir,
    Please explain be the below

    In cover orders , for example 1$ is trading around 60.50.
    Suppose i want that my COVER ORDER should get executed when the $ reaches 60.70 . Can i do the same by using limit and book from the current level. I mean can i use limit first in the cover order?

    • Vaibhav Vora

      The initial order (or say first leg) is always a market order and thus limit price cannot be kept.
      Cover orders are currently not available in Currency segment. We are working on making it available soon.

  • Puneet Maheshwari

    Dear Abhay,

    We are happy to inform you that the feature requested by you few months ago, where you can place Stop loss and target sell order together is now enabled in our trading platform. Name of this product is Bracket order.

    Thanks

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  • Dear Aman,

    You can place cover order in MCX futures., it is available in Nest. In case if you are facing any issues do let us know at support@rksv.in

    Thanks

  • disqus_XjJnqTfSZS

    Sir, Cover Orders are really great but is it possible to partly close an order? For eg, if I buy 10 lots of Crude then can I exit 5 lots first and later remaining 5 lots? How can this be done?

    • Vaibhav Vora

      Hi Sir, Sadly that is not possible. Maybe you can send 2 separate cover orders (5 lots and 5 lots) and then square them off separately

      • disqus_XjJnqTfSZS

        Ok. It will be great if you all see if this becomes possible sometime in the future. It will be a great function. Thanks