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Plain-English guides to how markets, trading and investing work.
How orders and margin work
Three diagrams of what happens when you place an order. None of them shows a price.
Diagram
Market or limit?
Diagram
Where a stop-loss sits
Diagram
What margin blocks
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Glossary
Plain meanings for the terms you’ll meet in our stories and in the app, grouped as the app groups them.
Order basics
- Market order
- Buys or sells straight away at the best price available. It fills fast, but the price isn’t guaranteed.
- Limit order
- Waits until the market reaches the price you set, then fills at that price or better.
- Stop-loss (SL-M)
- A trigger price that fires a market order when the price crosses it. It is meant to cap a loss, and the fill can slip past the trigger.
- Stop-loss limit (SL-L)
- Like a stop-loss, but crossing the trigger places a limit order instead, so the fill price is bounded, at the cost of perhaps not filling at all.
- Trailing stop
- A stop-loss whose trigger follows the price as it moves your way: it rises with the price for a sell stop that protects a long position, and falls with it for a buy stop that protects a short one. It never moves back, so it locks in gains as the trend continues.
- CNC (cash and carry)
- The delivery product. Shares you buy are held until you sell them, with no automatic square-off. STT is charged on both the buy and the sell.
- MIS (margin intraday square-off)
- The intraday product. A position has to be closed the same day: one still open near the close is squared off automatically, so it can’t be held overnight. STT is lower than on a delivery trade.
- GTC (good till cancelled)
- A pending delivery order, such as a limit, stop-loss, stop-loss limit or trailing stop order, that stays open past the day’s close until it triggers or you cancel it.
F&O
- Strike price
- The price at which an option’s holder can buy (a call) or sell (a put) the underlying. Strikes are listed in fixed steps around the current price.
- ATM (at the money)
- The strike closest to the underlying’s current price.
- ITM (in the money)
- A call with its strike below the current price, or a put with its strike above it: already worth something if exercised now.
- OTM (out of the money)
- A call with its strike above the current price, or a put with its strike below it: worth nothing if exercised now, so its premium is all time value and volatility.
- Open interest (OI)
- The number of contracts still open for a strike. Rising open interest with a falling price points to a short build-up; rising open interest with a rising price points to a long build-up.
- Implied volatility (IV)
- The volatility the market is pricing into an option, worked out backwards from the option’s price with a pricing model such as Black-Scholes. Higher implied volatility means higher premiums.
- Put-call ratio (PCR)
- The open interest in puts divided by the open interest in calls for an underlying. Above 1 it leans bearish, with more puts open; below 1 it leans bullish.
- Lot size
- The smallest quantity a futures or options contract trades in. The exchange sets it for each underlying and revises it from time to time, and an order’s quantity must be a multiple of it.
- Margin (SPAN + exposure)
- The collateral a broker blocks for an open futures position or a sold option: the SPAN margin from the exchange’s risk model, plus an exposure margin on top. It changes with each contract and with volatility.
Greeks
- Delta (Δ)
- How much an option’s price moves for a ₹1 move in the underlying. A call’s delta runs from 0 to 1, and a put’s from −1 to 0.
- Gamma (Γ)
- How fast delta itself changes as the underlying moves. It is highest for at-the-money options near expiry and close to zero for options deep in or out of the money.
- Theta (Θ)
- Time decay: how much an option’s price falls with each calendar day. It is almost always negative for option buyers, as the premium wears away towards expiry.
- Vega (V)
- How much an option’s price changes, in rupees, for a 1% move in implied volatility. It is always positive for buyers and negative for sellers.
- Rho (ρ)
- How much an option’s price changes, in rupees, for a 1% move in interest rates. The effect is small for short-dated Indian options.
Chart indicators
- SMA (simple moving average)
- The plain average of the last N closing prices. It reacts slowly and draws a smooth line of the trend’s direction; a 20-period average is the usual default.
- EMA (exponential moving average)
- A weighted average that counts recent prices for more, so it reacts faster than an SMA of the same period.
- Bollinger bands
- A middle line, the 20-period SMA, with bands two standard deviations above and below it. Wide bands mean high volatility; a squeeze, when the bands narrow, shows consolidation and often comes before a breakout.
Money & corporate
- Lakh (L)
- 1,00,000: one followed by five zeros, in the Indian way of grouping digits.
- Crore (Cr)
- 1,00,00,000: 100 lakh, or 10 million.
- P/E (price to earnings)
- The share price divided by the earnings per share over the last year. A high P/E means the market expects strong growth; a low one can mean a mature, undervalued or declining business.
- EPS (earnings per share)
- A company’s net profit over the last year divided by its number of shares. It is the bottom half of the P/E.
- STT (securities transaction tax)
- A tax on trades in listed securities, charged on both the buy and the sell of a delivery trade and on the sell of an intraday trade.
- GST (goods and services tax)
- Charged at 18% on brokerage, exchange transaction charges and SEBI charges.