5.8Why must intraday positions be closed the same day?
1What is it?
Because you only paid a margin, not the full price, and you chose not to take delivery.
2Why does it exist?
If you kept an MIS buy overnight, you’d need the full amount for settlement. For an intraday short sell (selling shares you don’t own), you must buy back, because you cannot deliver shares you don’t have. If you fail, the exchange runs an auction, which can be very costly.
3Quick revision
- Margin ≠ full payment.
- Short sells must be bought back.
- Failure to deliver leads to costly auctions.
4Knowledge check
Q1. What is short selling?Show answer
Selling first (without owning) hoping to buy back cheaper.
Q2. What happens if a short seller can’t deliver?Show answer
The exchange auctions shares, often at a penalty price.
Q3. Can you convert MIS to delivery?Show answer
Often yes, if you have enough funds for the full amount.