What will happen to my intraday position if the stock hits its upper/lower circuit limit?
Intraday trading carries the risk of possibly not being able to square off your position as a result of the concerned share hitting its lower/upper circuit.
A. In case an open buy position (long position) cannot be squared-off due to the stock hitting its lower circuit limit:
Suppose that you have opened an intraday long position (buy and then sell). To square off the position, you must execute a sell trade.
When a stock hit its lower limit, there will be no buyers to accept your sell order (only sellers will be available). As a result, such positions are automatically converted to delivery orders. If you do not have the required funds to accept delivery, your position will be squared-off on the next trading day, to the extent of fund shortage.
B. In case an open sell position (short position) cannot be squared-off due to the stock hitting its upper circuit limit:
Suppose that you have opened an intraday short position (sell and then buy). To square off the position, you must execute a buy trade.
When a stock hits its upper limit, there will be no sellers to accept your buy order (only buyers will be available). Since you don't hold the shares you have shorted in your demat account holdings (to give delivery), a short delivery auction will be conducted on T+3 to deliver them to the buyer. You will be penalised up to 20% of the short-delivered value.
If the short-sold shares are available in your demat account, they will be delivered to the exchange as part of delivery. However, if your PoA/DDPI isn't updated, the shares cannot be debited from your demat account and hence the short-sold shares will have to be marked for auction.
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