BTST Trading Explained (Buy Today, Sell Tomorrow)
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Published on Tuesday, November 12, 2019 by Chittorgarh.com Team | Modified on Sunday, August 9, 2020
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BTST (Buy Today, Sell Tomorrow) is a facility that allows customers to sell shares before they are credited into a demat account or take the delivery of shares. The decision has to be made in 2 days.
This facility is also known as ATST or Acquire Today, Sell Tomorrow. The reverse of BTST is called STBT i.e. Sell Today, Buy Tomorrow.
This facility is offered by most of the stock brokers in India likeZerodha,ICICIdirect, etc., where you can buy a stock today and sell it tomorrow.
BTST Means
In a normal equity delivery trade (buy/sell of stocks using CNC order), the transaction is complete in T+2 days where T is the day of trading. The buyer gets shares in his demat account and the seller gets money in T+2 days. So, if you buy some shares of a company on Tuesday, the shares will be credited in your demat account on Thursday. While counting T+2 days, holidays in exchanges are excluded. So, if there’s a holiday in between then the delivery period is extended.
What if you got an opportunity to book the profits or losses in between those 2 days? You cannot take this opportunity as it’s a normal order. This may result in losses for the trader.
BTST solves this problem of traders by allowing them to buy or sell their securities before these are credited in their demat account. This helps traders to benefit from short-term volatility in the price of the stocks.
How to do BTST with a broker?
To do BTST trades, you just have to buy the stock using the CNC product type and the next day sell the stock using the CNC product type. The broker takes care of these transactions in the background.
Customer does not have to choose any special order type or follow complex steps to use BTST facility. No special permissions or approvals required for this facility.
Note: That BTST trades are not allowed on Trade to Trade stocks and Stocks under GSM (Graded surveillance measures) or ASM (Additional surveillance measures).
BTST Key Features
- In BTST, you can sell a share before it is credited in your account. This option is available for two trading days after the buy order. On the third day, shares will be delivered in your demat account, and you can place a normal sell transaction.
- BTST is a unique trading facility provided by a few brokers.
- The BTST facility is only available for scripts that are approved by the share broker. For example- ICICI Direct allows BTST selling option only on NIFTY, NIFTY Junior & Margin Trading Scripts.
- Most brokers do not provide BTST facility for SME companies.
- BTST is not available for stocks in the T2T Segment (Trade to Trade Segment) wherein you have to compulsory take delivery of the stocks.
BTST Advantages
- It allows you to benefit from the short term volatility or increase/decrease in the price of the stocks.
- BTST trades do not attract Demat Debit Transaction Charges as shares are not credited in your demat account.
- If you find intra-day trading unprofitable, then BTST gives 2 more days to your trades to improve its performance.
BTST Disadvantages
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Unlike intraday trading, most stock brokers do not offer margin to BTST facility. The customer has to pay the full amount as the orders are cash & carry orders.
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BTST also comes with the risk of short delivery. Let’s assume you buy 100 shares under BTST today and sell the 100 shares the next day. Now, what if the person who sold you 100 shares didn’t deliver to you for some reason. Of course, he will be penalized by the exchange. The exchange will auction the shares and the person will be charged a penalty up to 20% of the value of the shares. Your shares will be credited on the next i.e. T+3 days.
Now, assume you buy the shares on BTST on Monday and sold it after an hour on the same day. You will get the delivery of bought shares on Wednesday and you also need to deliver the sold shares on Wednesday. In the case of short delivery, you will also not be able to deliver the shares and hence will be penalized by the exchange. So, in some scenarios, BTST may result in paying penalties.
BTST Vs Delivery
| BTST | Delivery |
|---|---|
| BTST facility is an extension of delivery orders. It offers additional benefits to normal delivery orders. | Delivery orders which result in the delivery of shares in the demat account on T+2 days. |
| Brokerage is same as delivery brokerage i.e. Zerodha offers brokerage free delivery trades. | Brokerage charge is as delivery brokerage. |
| Leverage offered is the same as delivery trades. In almost all cases there is no margin offered. | No leverage. |
| Higher risk of non delivery from the person you purchase the share | Low risk as shares are already with you before you sell them. |
BTST and Intraday
While BTST (or ATST) allows you to sell the shares bought on the same day. There’s a difference between BTST and intraday trading.
| BTST | Intraday |
|---|---|
| In BTST, you have the choice to sell the shares the same day or tomorrow. | In intraday trading, you have to sell the shares on the same day of order execution or convert the trade into a delivery trade. |
| The trader gets 2 days to settle the trade without being delivered to the demat account. | The trader has only the day of trading to settle the trade |
| It doesn’t offer an additional margin (no leverage). | Higher margins are offered for intraday trading. The broker gives from 5x to 50x margin. |
| Higher risk of non delivery from the person you purchase the shares. | No risk of short delivery as buying and selling happens on the same day. |
BTST Brokerage Charges
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BTST Brokerage Charges on Same Day
In such a case, your trade will be considered as an intraday trade and brokerage charges for intraday trading will be done.
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BTST Charges on T+1 or T+2 day Sell
Equity delivery brokerage charges are applicable in such cases. i.e. Zerodha offers brokerage free equity delivery this means you don’t pay any brokerage for these BTST orders.
Note: Some stock brokers may charge different BTST brokerage fees depending on your brokerage plan and the day of selling the shares. Please check with your share broker before placing a BTST order.
STBT (Sell Today, Buy Tomorrow)
STBT is an abbreviation for Sell Today and Buy Tomorrow. It is the reverse (shares are sold first and then bought) of BTST and works the same way as BTST.
None of the brokers in India offer STBT facilities as they do not offer shorting in delivery trading. Shorting is available in intraday trading.
If you have stocks in your demat, you can sell it today and buy it back tomorrow. Without stocks in demat, you can’t do STBT.
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