Cover Order - Buying Options

Finally! With the Union Budget passed last week, we can expect a good amount of volatility ahead as the markets get prepared for implementation of changes laid out by the Finance Minister. And, to facilitate your trading decisions, we have decided to offer the facility of Cover Order Buying on Options!  In case you want to know what Covers Orders are, here is an excellent introduction. Introduction to Cover Orders In February, we launched Cover Orders for Options Selling. Starting Wednesday, 16th July, we are launching Cover Orders for Options Buying. Here are the details.

Margin

Leverage is obviously very important for day traders. On Cover Order Option Buys, RKSV will provide 1.33x leverage. That means that with the help of the Cover Order facility, when buying a Cover Order Option, you will receive 1.33 times leverage on your trades. Another way to think of this is that you only need to pay 75% of the original premium value. Scenario: Suppose you are looking to place a buy on 1 lot of Nifty Options Call at a strike of 7500 at a price of Rs. 90.65. Using the RKSV Options Strategy Builder Tool, we can see that without cover orders we would need approximately Rs. 4532.50 to place the trade. Here’s an image that shows this.   Options Buying   However, by using the Cover Order Buying facility, the margin required would be 75% of the total Premium amount. Therefore, the margin required would be reduced to (Premium x lot size) * (75 %) = (Rs. 90.65 x 50 x 75%) = Rs. 3399.38 Not only do you get the accompanying stop loss benefit that accompanies cover orders, but you also get margin benefits. How is that for a win-win situation?

Stop Loss Range

The stop loss range for Cover Orders (both buying and selling)  is 20%. This means that if the price of the Option (Premium price) is Rs. 90, your stop loss range is from Rs. 72 to Rs. 108.

Placing a Cover Order on NEST Desktop

Here are some screenshots of orders being placed on NEST Desktop. Like always, you can also place cover orders on our Web platform as well! NEST1 NEST2   All other functions are the same as per our previous blogs on Cover Orders. Cheers! -Raghu

Raghu Kumar

Raghu Kumar

Raghu loves trading, algorithms, and figuring out ways to beat the market. He enjoys workouts, naps, food, listening to Carnatic music, teaching his dogs (pug named Zenzi and Shih Tzu named Cactus) cool tricks, and spending time with family and friends.A list of his authored articles on NDTV Profit can be found at http://profit.ndtv.com/topic/rksv

  • saurabh choudhary

    Hi Raghu, I would like to know whether we would need to square off the position on intraday basis, like in fo and cash. Or we could take the position to next day in options.

    • Hi Saurabh!

      All intraday positions, regardless of whether it in F&O or Cash, need to be squared off the same day. Hope that answers your question.

  • Vivek Koli

    NUMBER OF COVER ORDER NEEDS TO BE PERMITTED IN ODER TO TAKE ADVANTAGE . ONE COVER ORDER IS GOOD FOR TAKING DIRECTIONAL POSITION. FOR TRADER , MORE NOMBER OF COVER ORDERS AT A TIME.

    • Hi Vivek!

      Excellent points.

      1. We do provide the option of multiple cover orders, so you don’t need to worry about that! Momentum traders and jobbers can take advantage of that.

      2. Great point on limit orders. We are looking to provide that facility by the end of the August. Keep checking for updates!

      3. That’s a good point. We are definitely looking to increase margin for buying options, but like everything we do at RKSV- we like to take things one step at a time. We will look to offer additional margin for buying options, but we will need to wait for some time until a lot more users are using the facility. Our RMS team will let us know when the time is right ;-). Since just introduced this facility and so few brokers offer it, it’s better to always be diligent with RMS.

      Keep the questions coming!

      Cheers,
      -Raghu

      • Vivek Koli

        NICE TO KNOW ABT IT. I WILL TRY MULTIPLE COVER ORDERS TOMARROW.
        DO YOU PROVIDE ALGOTRADE ALSO . IF YES , WHAT ARE THE REQUIREMENTS FOR THE ALGOTRADE.

      • zubin

        How do you use mutliple cover orders option? Can we use cover order if one cover order entry is closed and another one is taken?

        • Dear Vivek,

          Yes, you can place multiple cover orders, even if one is already open. You do not need to wait to close one before initiating a new one 🙂

          Hope that answers your question!

          Cheers,
          -Raghu

  • Vivek Koli

    HI RAGHU
    RKSV has really brought cheers for traders,
    I have introduced three clients and i am training them in nifty options. I will be shifting them to pro plan. If THREE times leverage in cover order in BUYING/SELLING OPTION is allowed for a stoploss of 80 percent of capital in your system it will help a lot with no risk to you.. MORE number of accounts can be introduced with small capital of 20000/-

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