While placing a buy or sell order you must have seen the option of intraday or delivery on your screen. Have you ever tried to know the difference between intraday and delivery trading?
In this article, let us know the exact difference between intraday and delivery trading.
What is intraday?
Intraday trading involves buying and selling a security or contract within the same day. All positions are squared off before the market closes.
Which means, both the legs of a trade i.e. buying and selling is closed on the same day. Net holding position for a transaction will be zero.
If you execute one side of the transaction i.e. either buying or selling in one day, then your position is open. It will be closed on some other day based on your strategy. In this type of order, you have to choose “Delivery” as it’s not an intraday transaction.
In case you do not close your intraday position before the end of the day, then it will automatically squared off by your broker. Some brokers prefer to square off between 3:15 pm to 3:25 pm instead of waiting for the last minute. Therefore you need to make sure that your intraday position is closed much before these deadlines.
Intraday is also referred to as day trading.
Day trading is ideal for short term traders aiming to profit from price fluctuations during the trading day. It allows you to capitalize on intraday price movements without holding positions overnight.
Suppose on 15th December 2023, you have seen a very good opportunity in a stock listed in a stock exchange. You have decided to take profit from the price move on the same day. In this case, you will execute an order by selecting option intraday.
Some brokers instead of using the term intraday, they use the term “MIS”.
MIS stands for Margin Intraday Square off.
Another most important reason why brokers want to choose the option between intraday and delivery is leverage.
In MIS or intraday trading, almost all brokers give 5 times of the cash available in your account as leverage. For instance, if you have 10,000 rupees in your account, then you can do intraday trading for a capital of 50,000 rupees.
If you have pledged your holding with the broker, then the leverage amount can be higher.
What is Delivery?
A delivery order is used for buying a stock or contract with the intent to hold it for the long term, typically beyond one trading day.
Delivery orders are suitable for investors who want to invest in a stock for any duration short to long term.
When you place a delivery order you become the actual owner of the share and they get transferred to your Demat account.
Example to understand intraday and delivery trading
Suppose shares of a listed security are trading at Rs 1,000 per share at 10:05 AM. You are expecting the stock price to go up during the day.
As an intraday trader, you have bought 500 shares of the listed security for Rs 1000 per share at 10:05 AM. When the stock price went up to Rs 1050 per share, you square off your position with a profit of Rs 50 per share.
This type of trading is known as intraday trading, you square off your position within the same day.
Suppose instead of selling the stock on the same day, your plan was to hold it for 2-3 days. In this case, instead of choosing intraday, you have to select Delivery, as in this case you are going to hold the stock for a few days in your Demat account.
After buying with option as “delivery” these stocks will remain in your Demat account until you decide to sell them.
You can convert your intraday position to delivery if your stock broker allows you to do this. If you are on leverage, the broker may ask you to deposit the differential amount before such conversion.
Intraday vs delivery: comparison
| Particulars | Intraday | Delivery |
| Meaning | Process of buying and selling shares on the same day | Process of buying shares on one day and selling at a later date, or process of selling shares on one day and buying at a later date. BTST (Buy Today Sell Today) trades are also referred to as delivery trades. |
| Demat transfer | No holding or transfer of shares to the Demat account | Shares are debited from and credited to the demat account based on the selling/buying order placed. |
| Ownership | You are not considered as a owner of the share | You become the rightful owner of the shares until you sell it from your account. |
| Time limit | Buying and selling takes places within the same day | No time limit restriction, you can sell it anytime based on your strategy |
| Margin | In general, traders get a higher margin for intraday trading. It’s basically decided based on cash/security pledged with the broker and the stock you trade. | Mostly cash settled. However, some brokers are providing margin facilities for delivery traders as well. |
| Risk | Riskier than delivery | Less riskier than intraday |
| Brokerage | In general, most brokers are charging 20 rupees per order as brokerage based on your capital. For less capital traders, some brokers are charging 0.03% to 0.05% as brokerage. | Many discount brokers are not charging brokerage for delivery trades. |
Disclaimer: In addition to the disclaimer below, please note, this article is not intended to provide investing or trading advice. Trading in the stock market and in other securities entails varying degrees of risk, and can result in loss of capital. Most investors and traders lose money. Readers seeking to engage in trading and/or investing should seek out extensive education on the topic and help of professionals.
