Dear Friends,
Pl explain the criteria for selecting a stock either for " BTST' or for ' STBT'.In case of failure,what should be the exit strategy?
ranga
Hi rangarajan,
Although I too used to do a lot of BTST on stocks ( as far as I know there is no broker which would let you carry a short position in stocks for the next day, only futures shorts can be carried forward IMHO), I've realised it is extremely risky and not worth the energy. The reason for the same is that if there is a shortage of delivery from the Exchange then your whole transaction goes to the drain, I'll explain it with an example,
say I buy 100 shares of xxx company at 700 rupees on Monday for the purpose of BTST, then on tuesday I see that the price has gone upto 750 so I sell the 100 shares with a profit of (750-700)*100 = 5000, I'm happy right. And then the troubles start, on Wednesday I find out that the exchange was unable to deliver the shares to my DP and the stock price has gone upto 850. Now I have an obligation to give the buyer 100 shares at 750 rupees the ones I sold on Tuesday on the T+2th day i.e Thursday which I won't be able to as I did not receive the shares from the exchange for my transaction on Monday. Now, suppose the price keeps rising to 900 by the time your auction takes place (since you will be unable to provide the delivery your transaction will be processed through an auction), your great profit transaction will turn into a loss making one and that too a huge loss.
The broker's do not take any responsibility for the shortage of deliveries from the Exchange and BTST is just a way for them to make profits via. their brokerage.
If you still think its a good idea to go in for BTST then I'd suggest go in for stocks which have high volume trading on NSE and have a high beta value. You could check out the most active stocks on the NSE website.
Thats my 2 cents on the topic. Seniors please correct me if I'm wrong.
Thanks
