What is Zerodha Cover Order?

Short Answer

Zerodha offers a wide range of services and tools for traders and investors to make their trading experience as seamless as possible. For those wanting to know, What is Zerodha cover order? It's then a unique way to minimize the risk in intraday trading and maximize the profit that one might avail.

Detailed Answer

What is Zerodha Cover Order (CO)? Meaning

Zerodha's cover order for a buy or sell order refers to the order placed is accompanied by a compulsory stop-loss order. It might be specified to a particular range. The cancellation of the stop-loss order isn't feasible.

The risk automatically reduces due to the automatic submission of stop-loss order along with the main contract. Due to the reduction of risk, there is much greater leverage provided; in turn, the margin requirement reduces simultaneously.

The time for squaring off these orders takes place at 3:20 PM. Both CO and BO are intraday products. If the volatility of the markets increases, then these orders can be squared off earlier with a notification sent to you.

Zerodha Cover Orders

A very important point to remember is, Zerodha Trader allows to place Cover orders for NSE in Equity, F&O & Currency segments and MCX (commodity) only.

But, CO's are not allowed on the BSE stock, currency options, and stock options.

Cover Orders: Important Pointers to Note

1.CO's can be carried out under currency & commodity options, F&O, and equity.

2.They are not allowed on the BSE stocks, currency options, and stock options.

3.Once the stop-loss order is placed, it cannot be cancelled.

4.CO is strictly an intraday product.

Zerodha Cover Order: Benefits

Few benefits of placing acover order are:

1. Low association with risk

When a cover order is placed, the overall risk associated with the order goes down dramatically. The primary reason for this is the stop-loss order placed along with it. Traders know the maximum amount of loss they would incur before placing the order. Additionally, keeping an eye on the prices of the stick isn't required as the order would be executed once the primary range of the order is met.

2. Higher leverage

Higher leverage can be availed by traders as there is the addition of a stop-loss order. Through this format, the risks are reduced in comparison to normal order and gains higher leverage.

Types of cover order

1. Long Cover Order

What this means to say is that when an investor purchases the stocks of a company through cover order, it's called a long cover order. It's for the long term investment where they buy it for a lesser price and sell it for a higher price later on.

2. Short Cover Order

Under short cover order, if an investor decides to sell the shares of a company, then it's said to be a short cover order. Through this format of cover order, the shares are sold for a higher price compared to what he/she might have bought it for. Also, the value of stop loss is set at a higher price than its sold.

How to Place Cover Orders?

For placing a Cover Order, you have to follow few simple steps and done. Simply click on the Contract and press \Shift + F1\ (to place a buy CO) or \Shift + F2\ (to place a sell CO).

There is an \Orders and Trades\ menu on Zerodha Trader where you can view your Cover Order easily. In case, you aren't able to see the said option, this means that the Cover Order facility may not have been enabled for you. So, you can contact Zerodha Support team or email your query to them to have it enabled for you. 

Thus, Cover orders are quite convenient in ways to provide definitive profits based on the order and volatility of the market. What do you think? Are you a stock trader? Do share your tips and tricks to guide others.

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