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Basket Order Trading in the Share Market

Basket Orders

As a trader, timing is everything as even the slightest delay in execution can result in losing out on lucrative opportunities. This is where basket order comes into the picture. A basket order is an order type or a feature which facilitates placing multiple orders in one go. This helps you take timely advantage of market movements, reduces time spent on order execution, and avoids slippages.

In its simplest form, a basket order is like a shopping cart. You don’t add one item in the cart, make its payment and then place another order, correct? You add all the items you wish to buy in the cart at once and then make a combined payment. This is exactly how a basket order works.

How do retail investors use basket trade?

A basket order is useful for both traders and investors. For investors, it's especially useful in tracking stocks for which there are no set indices. For instance, if you are planning to track stocks from the oil sector, you can simply add stocks like Reliance Industries Ltd., MRPL, CPCL etc. in one basket and buy them in one go.

While beneficial for investors, basket order is typically used by option traders to execute multiple legs of a strategy at one go. For instance, assume you are bullish on Nifty and decide to buy the current month Nifty Futures contract. But you also want to hedge your position, so you buy an 18300 PE (put option). Without a basket order, the required margin for this trade will be ₹ 1,08,372. This is because the system doesn’t account for the hedge created by the put option as seen in the below screenshot.

But if you execute the same strategy with a basket order, the system will acknowledge the hedge created by the put option and the required margin reduces to ₹34,659.10 (screenshot below).

This is how basket orders help you avail hedging benefit on your trades.

Advantages of basket orders

  • Saves time:

    Traders can save time using basket orders as multiple orders are placed in one go. So, there is no need to place and execute individual orders. By using basket orders, the time saved on execution can be utilised in analysing the market and discovering market opportunities. Brokers like m.Stock offer basket order facility without any additional costs and you can create up to 25 baskets with a maximum of 20 stocks per basket.
  • Better clarity and strategising:

    Since you can see all legs of your strategy on the same screen, you are in a much better position to evaluate your strategy instead of swapping between multiple tabs and orders.
  • Hedging benefit:

    When you place individual orders, you do not get a hedging benefit and have to pay the entire required margin upfront. But when you hedge your position, you get the benefit of hedging in terms of lower required margin. Consequently, your capital is freed up to be invested elsewhere.

Important points to remember about basket orders

  • Margins:

    Since you are dealing with multiple orders, it is important to keep a close eye on the margin requirements. To execute your basket without any hassles, your ‘available margin’ should always be more than the ‘required margin.’
  • Order types:

    You can place both limit and market orders with basket orders. While a market order will get executed immediately, limit order will be executed as and when your desired price level is reached.
  • Expiry:

    With brokers like m.Stock, your created basket remains accessible even after it is executed. So, you do not have to create the same basket every time. Your basket will remain accessible unless you delete it manually.

If you are looking for a platform which offers useful tools like basket orders, then your search ends here at m.Stock. We provide basket orders where you can create as many as 25 baskets, one of the highest in the industry. But that’s not all. With us, you also enjoy brokerage-free trading across products for life at a one-time fee of ₹999. So, if you are serious about trading, then you must open a Demat account with m.Stock because in trading, every minute, and every penny counts.

Frequently Asked Questions

With m.Stock, you can create as many as 25 baskets with 20 scrips in each basket.

No, with m.Stock, you can avail basket orders and create baskets free of cost.

In addition to basket trades that involve buying stocks, some baskets are also bought to track currencies and commodities.

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