BTST or STBT

What is BTST or STBT:

If we try to explain STBT and BTST calls, these are very short term trading calls. These are also called overnight trades. BTST or STBT calls are different from intraday calls. In intraday calls you take a trade in the morning, after the opening of the stock market and close it by the end of the day.

While in case of BTST (Buy Today Sell Tomorrow) or STBT (Sell Today Buy Tomorrow) you take a trade near the closing of the share bazaar. These BTST and STBT calls are closed on the next trading day after the opening of stock market.

STBT:

A stock must be in f&o segment, if you want to sell it and carry it overnight for a STBT trade. Because, there is no short selling allowed in equity segment. You can sell stocks at any time, which are in your demat account. 

But you can’t sell stocks which you don’t hold in your demat account. If you short sell a stock in cash segment, you have to buy it back by the end of the day. So for a STBT call, you can only short sell index, stock, commodity or currency future.

The National Securities Clearing Corporation Ltd. has launched the ‘Securities Lending & Borrowing Scheme’ (SLBS) on April 21, 2008. In this scheme you can short sell securities which you don’t hold in your demat account.

BTST:

In case of BTST it is usually advisable to take an overnight trade in f&o segment. If you purchase a stock in equity segment today, you will get the delivery of that stock on the third day. Normally brokers allow you to sell today’s purchase on the next trading day, except in case of ‘Trade for Trade’ scrip. But the brokerage is higher in case of delivery, so BTST is more use full in derivative segment. Some times in case of midcap or small cap stocks which are not in f&o segment, you can use BTST even in equity segment, because there is no other choice.

Options:

When some major news is awaited, it is advisable to use Call or Put options for taking a BTST or STBT trades. Suppose, after the closing of our share bazaar there is some important decision on interest rates from US market will come. This news may take the world equity markets 2 to 5 percent up or down, depending upon the decision.

In this case it is better to use call or put option to take a BTST or STBT trade. If you think the decision will be negative and it will drag the Nifty downward, instead of selling Nifty future for a STBT call, you should purchase a Nifty Put option. If you sell Nifty futures, your profit or loss will be unlimited. But if you buy Nifty Call or Put option your loss will be limited to the amount of premium you have paid, but profit will be unlimited.              

Selection Criteria for BTST or STBT:

When a stock or index breaks out of a range near the closing of market, it will be qualified for BTST or STBT. Suppose XYZ Ltd. is trading in the range of 385 to 395 from last 5 days. Today near 3 p.m. bulls have broken the resistance of 395 and XYZ Ltd. is trading at 401. Here you can buy XYZ Ltd. Future and carry it overnight for a BTST trade.

Suppose, if a stock breaks out after a long period of consolidation and is up by 5 to 7 percent, it will also qualify for BTST trade, because it should continue its move for some days.

After some days of moving in a direction, if a stock comes near its support or resistance, it will also qualify for BTST or STBT. These are some examples of selection criteria of BTST or STBT calls. There can be more principles for selecting a stock or index for STBT and BTST.

RISK:

There is always risk involved in share bazaar. So these BTST or STBT calls also have risk. The market can open against your views and you have to book your losses in the early morning for the BTST or STBT trades that you carried overnight.