Square Off
To square off a position simply means to close it. If you bought shares, you square off by selling; if you sold (shorted) shares or futures, you square off by buying back. The term shows up in intraday auto square-off, broker square-off due to margin shortfall, and traders’ daily routine of flattening positions.
Key takeaways:
- Square off means closing an open buy or sell position so your net exposure becomes zero.
- Intraday MIS positions are auto-squared by brokers before the close of trading.
- Manual square off lets you exit at your chosen price; broker square off uses market orders that may slip.
- Square off applies to equity, F&O, currency and commodity trades.
- For F&O, you can square off any time before contract expiry under NRML.
What does square off look like in practice?
Suppose you bought 100 shares of Tata Motors at ₹900 under MIS. To square off, you sell 100 shares of Tata Motors before the day ends. Your net position in Tata Motors is now zero, and you book a profit or loss equal to (sell price − buy price) × 100, minus charges.
For futures, if you sold one lot of Nifty at 22,200, you square off by buying one lot of the same expiry contract. You do not need to physically take delivery — the exchange nets out your obligations.
Types of square off
- Manual square off — you decide when to exit and place the closing order yourself.
- Auto square off — broker automatically closes intraday positions before the cut-off if you forget.
- Forced square off — broker closes positions if your margin falls short of the maintenance level.
- Expiry square off — for F&O, contracts are settled (cash or physical) on the last Thursday of the month or weekly expiry day.
Auto and forced square off
Brokers run a risk management system (RMS) that monitors every account in real time. If you leave an MIS position open past the cut-off, the RMS sends a market order to close it. This protects the broker from carrying intraday risk overnight. The same applies in F&O if your margin falls below the required level — the broker can square off without warning to recover funds.
Forced square off can cause large slippage because market orders chase whatever price is available. Always close positions in time to avoid this.
Square off charges
The square off leg attracts the same brokerage and statutory charges as a regular trade. There is no separate fee for closing a position. However, if a broker squares off on your behalf, some brokers levy a small auto-square-off penalty (often ₹20–50 per order).
Strategic square off ideas
- Partial square off — exit half your position at the first target and let the rest run with a trailing stop.
- Time-based square off — close everything by a fixed time, regardless of P&L, to avoid being trapped by news.
- Hedged square off — when closing a futures position, also close any options used as hedge to keep risk consistent.
Square off vs reversing a position
Square off makes your position zero. Reversing means going from long to short (or vice versa) — for example, selling 200 shares when you owned 100 leaves you 100 short. Reversal is essentially a square off plus a fresh trade in the opposite direction and uses more margin.
Frequently asked questions
When does intraday auto square off happen?
Typically 3:15 p.m. for cash equity MIS and 3:25 p.m. for equity F&O. Currency and commodity timings differ.
Can I cancel an auto square-off order?
You can pre-empt it by manually squaring off earlier. Once the auto square-off market order is sent, it usually executes immediately.
Do I need to square off CNC positions?
No. CNC delivery positions stay in your demat until you choose to sell.
What if I cannot square off a stock that is in upper/lower circuit?
You may be unable to exit until liquidity returns. Brokers usually treat this as a force-majeure event and adjust margin requirements accordingly.
