CNC VS MIS Order

CNC vs MIS Order – Know the Difference to make Safer Order Types!

CNC full-form in the share market is Cash & Carry (CNC), and MIS full-form in the share market is Margin Intraday Square off (MIS). CNC stock trading is for investors who plan to keep shares for days, weeks, or even months. MIS order types are used for intraday trading without share delivery.

Let’s understand the topic clearly in the article below.

We live in an age where technology has facilitated every part of our life. They are all made to provide us with comfort, whether it is a television, refrigerator, microwave, or washing machine.

If you’ve ever purchased a home appliance, you’re probably aware that we can make a partial payment or down payment, and the remainder of the payment can be made later, according to the agreed terms and applicable conditions.

This type of facility is also available in the stock market. Margin Intraday Square off (MIS) allows traders to book transactions by paying a percentage of the total transaction value.

Whereas in Cash and Carry (CNC) transactions, the entire transaction amount must be settled before the shares can be acquired. 

For an investor, it becomes crucial to have adequate knowledge about stock markets trading methods such as MIS and CNC and to understand what they entail. How is such a transaction ordered?

But before we move forward, let’s learn what is intraday trading!

Content:

What are Cash & Carry (CNC) and Margin Intraday Square off (MIS)?

CNC full-form in the share market is Cash & Carry (CNC), and MIS full-form in the share market is Margin Intraday Square off (MIS). These are the ways you can place an order in the stock market to buy or sell any shares or securities through a stockbroker.

Cash & Carry is a way to trade in which the traders can only trade for the number of shares they own in their Demat account. The trader can only make a deal if he has enough money in his bank account to make it happen.

In the Margin Intraday Square-off method, the trader can short-sell shares and other securities through their Demat account. For this transaction, the trader only needs to have a certain amount of money in their bank account, and the balance amount will be covered by the margin or the leverage provided.

What is Cash & Carry (CNC) in Trading?

Cash and Carry is a form of stock market trading for investors who intend to hold the shares for a few days, weeks, or even months in some situations. These are delivery orders in which the investor’s purchases or sales are reflected in his Demat account.

This means that if the Investor purchases 100 shares of a Company, his holdings will represent the addition of 100 shares to his total holdings. Similarly, only such shares which are already held by him in his total shareholding would be allowed to be sold (short selling is not allowed).  Also, CNC orders require sufficient supporting bank balances for the transaction to be fully executed. Leverage is not granted in the CNC orders. 

For example,

An investor has funds of ₹1 lakh available in the account. He wants to execute a trade to purchase 1500 shares of ₹100 each. He would be allowed only to place an order for the purchase of only 1000 shares costing ₹100 per share. 

Once the order is successfully fulfilled, the investor is allowed to hold 1000 shares of the said firm because he paid in advance for those shares; there is no time limit in this scenario. Similarly, if the investor desires to sell this firm’s shares, then they must be present in his Demat account.

Learn more about Cash & Carry (CNC) Trading. 

What is Margin Intraday Square off (MIS) in Trading?

Margin Intraday Square off (MIS) requires the investor to either square off his position on the MIS order or convert it to another form of order prior to the market close on the day the order is placed. Otherwise, the broker will automatically close this position prior to the Stock Market’s closing hour.

Furthermore, MIS allows the investor to utilize the facility of leverage provided by the stockbroker; even short selling is allowed. The leverage provided by the broker enables the investor to participate in much larger trade transactions without being constrained by his available cash.

For example,

In the above example, if an investor has funds of only ₹1 lakh available in his account. And he wants to execute the trade of a purchase order of 1500 shares of ₹ 100 each. The margin is 10%, then he needs to have only 10% of the total value of the transaction, i.e., ₹15000 (10% of 1500 shares at a rate of ₹100 per share). 

If the investor does not square off his position on his own or does not convert the MIS order to another sort of order before the market closes on that day, the broker will automatically square off the position before the market closes.

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