While a lot of information is available about trading strategies, for novice traders, it is equally paramount to learn about the little nitty gritties of investing. While it might seem basic, lack of knowledge might result in huge opportunity costs. Sometimes, it can be as basic as knowing about things within an application, where things like CNC and MIS matter.

Now, let's understand these product codes one by one.

What is MIS? Full form & Meaning

The full-form of MIS is Margin Intraday Square-off (MIS).

Margin Intraday Square-off (MIS) is used mainly in intraday trading, which can be used for assets like stocks, futures and commodities. Basically, in such type of transaction, you get a margin, which is nothing but credit extended by the broker. Another important aspect to note that such positions, being primarily intraday, are squared off by the end of the day, i.e the position will be exited voluntarily or otherwise.

What is CNC? Full form & Meaning

The full-form of CNC is Cash and Carry (CNC).

Cash and Carry (CNC) is basically a service code, a product code that is used for delivery-based equity. Using CNC while trading simply means your transaction is entirely cash basis, i.e. the payment is done while purchasing the stock. There is no need or utilisation of margins, but instead, you pay ‘cash’ and ‘carry’ the underlying asset i.e. the shares in your demat account. Needless to say, there can be no short selling transactions through this method.

This code is suitable for infrequent traders and investors, by extension for all the long positions. You can use this for all the assets. Also, note that ‘cash’ here does not refer to physical cash, but used as an antonym of credit.

What is MIS and CNC in Zerodha?

Whenever you place an order through Zerodha Kite or Pi, you may require to use products codes like MIS and CNC.

In Zerodha (a leading stock broker in India), when trading through the product code MIS, the broker provides a margin of 3 to 10 times of your balance, depending on the risk parameters associated with the stock. While using MIS with Futures, the margins provided would be 35-45% of the total margin required, which again depends on risk parameters like \span of the future contract\ and \potential exposure\ (Span+Exposure) created due to said contract. Note, that Zerodha does not provide a margin for trading \Options.

Also, all the positions created using such margins would be treated as intra-day only, and will be squared off by 3:20 PM – 3:25 PM. While using MIS for commodities, there is extra leverage provided, and for overnight exchange stipulated margin, you only need 50% of that amount. MIS is the product code to be used while using Zerodha for short selling.

While using CNC in Zerodha, no extra margin would be provided, which is to say you can only place a BUY order for the amount you are willing to pay upfront. However, in CNC type of transaction, the position would not be auto-squared, instead you will ‘carry’ the asset till you decide to place the SELL order. Till then, the asset would remain in your demat account.

MIS and CNC: Product Codes

While these are both product codes with purpose, note that this does not mean that you cannot do a intraday transaction using CNC. Simply put, using CNC, you trade with the money you have, and you get actual possession of the asset. You can choose to sell this asset within the same day and it would be considered an intra-day transaction.