Here is everything you need to know about the CNC vs MIS orders in the stock market. This article will also cover the difference between both orders.
What are CNC Orders?
CNC, also known as the Cash N Carry, is a non-intraday product used in the BSE and NSE equity segments. This is used in the delivery segment to buy and sell the stocks. The shares purchased under the CNC are transferred to the Demat account in T+2 days. On the other hand, the shares sold will be transferred from your Demat account to fulfill your sale obligations with the exchanges. For example, if one is looking to buy the shares of companies and wishes to sell the shares of the companies in a few days, one can use the CNC as the product type.
CNC Order Margin
As the name suggests, the traders of CNC or the investors will get no leverage for this product or a Leverage of 1x. For example, if someone has put Rs 1000, he is restricted to buy shares worth 1000, and no multiplier would be given. But on the other hand, if the one has paid the full amount for the shares purchased, there would be no RMS square off when purchased using CNC.
That means the purchased shares will be sold on the instance of the traders and the investors. CNC is not limited to delivery if required; the shares purchased in CNC can be sold intraday, and the brokerage would be charged for intraday only.
However, the CNC option would not be used for the short-selling Intraday. In short, the Risk Management system RMS will not allow the selling of the shares under the CNC options if the shares are not available in the client’s Demat account. Also, traders can easily convert to MIS from the position book.
What are MIS Orders?
MIS Orders are one of the most popular orders among intraday traders. The full form of MIS stands for “Margin Intraday Square off.” In simple words, the position you hold in the share market has to be squared off or converted to the other type of order before the market time ends, or else the broker will automatically close it by the end of the day. For example, if you buy the 100 shares of some company in the morning, you have to sell them back before 3:20 PM. The exact square-off time depends on the brokers, or the broker will automatically sell those shares.
Things to note before trading with the MIS Orders
Here are some of the things you need to know before placing a trade with MIS for the intraday.
Leverage by Broker
If the MIS orders placed are purely intraday orders, the broker will lend you money, also known as LeverageLeverage. This way, you can take bigger trade than the capital you invested. For example, if you have 20 thousand as your capital, you can take a trade worth 30-40 thousand. The LeverageLeverage does change from broker to broker, but the intraday traders can use the facility to maximize their profits actively.
Short Selling Allowed
You can hold a short position on a stock using the MIS orders.
Auto Square Off
It is important to note if you are not able to close your position by 3:20 PM, your broker will automatically close it. It is important to manage the trade accordingly.
Differences Between CNC vs MIS
Here are the key differences between the CNC vs MIS order.
● One of the basic differences between CNC and MIS orders is that CNC orders are delivery orders, whereas MIS orders are intraday orders. In the MIS orders, if the person fails to square off the MIS order, it shall be squared off by the RMS (Risk Management System) before the market closes.
● CNC orders do not have margin multipliers, whereas additional Leverage and margins are available for MIS orders.
● If you don’t want to trade intraday, you can go with the cash and carry and take delivery of the order after the goal of the price is met, and then you can sell the security accordingly. If you are a trader who understands the market dynamic can go with the intraday trade and take advantage of the market fluctuations. Choosing the correct order type is necessary.
● CNC orders do not have margin multipliers; on the other hand, additional Leverage and margins are available with MIS orders.
Summary – CNC vs MIS
|The full form of CNC is Cash and Carry.||The full form of MIS is Margin Intraday Square off.|
|This is used for placing orders in delivery trading.||It is used for placing orders in intraday trading.|
|This is only applicable for the Cash Equipment.||This is applicable for all the segments i.e.- Equity, F&O, Currency, and Commodity.|
|There is no leverage available for CNC orders.||There is Leverage up to 5x times available for Equity MIS orders.|
|Short selling is not allowed using CNC product type.||You can short sell via MIS product type, you can square off the position the same day. Also, you cannot convert MIS to the CNC product type unless you have stock in the Demat account.|
|The brokerage is Lesser for CNC orders. Few brokers offer free Equity delivery trading.||The brokerage is higher for the MIS orders compared to CNC orders.|
|There is no risk involved in the auto square off for CNC orders.||If the order is not sold MIS orders carry the risk of auto square off with charges if the square-off isn’t on the time specified.|
|There is less risk of loss in the holding capacity.||There is a risk of loss if the price goes in an unfavorable direction during the day.|
In conclusion, this article covers the basics of CNC vs MIS Orders. On the other hand, CNC is cash and carries, and MIC is Margin intraday square off. CNC orders are placed for the delivery trade, and MIS is placed for the intraday trade. If you want to know more about the CNC vs MIS Order, you can contact your broker or sub broker.