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Buy Today Sell Tomorrow



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BTST is a popular investing method for short duration.

BTST stands for Buy Today Sell Tomorrow.

As the name suggests, the rationale behind this method is to buy some company shares today (T day) and sell them the next trading day (T+1 day).

The shares are bough as CNC (Cash and Carry) so that they do not get squared off at market closing.

In India, Cash based delivery trades are settled on T+2 basis.

In BTST, the shares will be sold even before they are taken delivery (on T+1 day) and hence the shares do not come to demat till T+2 days.

Check with your broker if they offer this facility.

Some brokers such as ICICI Direct have a separate product type called BTST only under which the shares needs to be bought so as to be sold the next day.

Further, some brokers do not allow BTST for all companies.

They offer only for highly liquid shares in the market (such as thinly traded shares, BSE-only shares etc).

Further, BTST cannot be done in T-group shares or in shares that are in T2T segment because for the sell in T-group to happen the shares need to be in the demat and it will take T+2 for the shares to come to the demat.

The time of purchase is usually at the latter part of the trading session (usually post-noon) and ideally between 2:00 PM and 3:30 PM.

Because the shares are actually bought and held overnight, brokerage is charged on the shares as per the delivery rates or charges.

BTST is a form of non-intra day square-off trading.

Strategies

One common question most investors get is about at what rate to buy and at what rate to sell.

There are several methods, techniques and strategies for this.

For instance, some investors buy when the company stock price comes to support levels and since time is less, the position is carried for the next day and is sold at resistance levels.

Another method is to buy and hold it in an anticipation of news (such as quarterly results of the company expected to come as good) and sell the next day at a higher level.

Some technical analysts consider buying the stock when SuperTrend gives a Buy signal on 1 hour charts and sell them the next day.

Finally, one blind yet simple process is to buy and sell them at flat 2% gains the next day.

In general, it is better to close (sell) the position the nexy day as soon as possible.

Advantages

BTST is a useful option for traders / investors who have a position (bought shares) and feel that there is more scope for it to go upwards but the market closing time has reached.

This way, it makes sense to carry forward the trade for the next day for better profits.

Disadvantages

There are few disadvantages with this method as well.

For example, if there is any change in macro economics or an adverse news to the stock markets or the company, BTST position might not yield profits and you may be forced to stop loss the trade.

For example, an overnight news of a war between countries or Fed rate tweaking might lead to a gap down of the market the next day and there by BTST might not be profitable.

Another disadvantage with this approach is that the investor needs to buy the shares in cash and no margins are usually given by the brokers.

There might be problem with settlement when there will be short delivery of the shares that you buy.

For example, we do a BTST buy of say 100 shares. The next day, we sell the 100 shares. However, when there is a short delivery of the 100 shares, and since you have sold 100 shares without actually having the shares in hand, it leads to a problem and the broker will do the necessary process (such as auctioning process etc) which leads to unnecessary inconvenience, confusion, blocked money as well as expenses. Hence, it is always advisable to go for such shares that are well traded in the market because they have good liquidity and the possibility of a short delivery is less.

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