A Cover Order is a unique order type that combines elements of both a Market/Limit Order and a Stop-Loss Order. It comprises two legs: the first leg is always a Limit/Market order, and the second leg is a Stop-Loss Order. You can learn more about Cover Orders here.
If the first leg is a buy (Market/Limit) Order, the second leg would be a sell (Stop-Loss) Order. Conversely, if the first leg is a sell (Market/Limit) Order, the second leg would be a buy (Stop-Loss) Order. Both legs of the order are interconnected, and modifications can be made up to the last traded price (LTP) in case of a favorable market movement.
One major advantage of the Cover Order lies in the margin it provides for the trade. By limiting potential losses to a specified amount, you only need to pay for the determined loss and not the entire amount. For instance, if you buy a stock at ₹100 with a maximum acceptable loss of ₹5, your order will close if the stock reaches ₹95 (₹100 - ₹5).
To place a Cover Order, select CO in the order complexity section while placing an order. Enter the Limit Price and the Stop-Loss sell price during the order placement process. It's important to note that, like all Intraday Orders, Cover Order positions are closed at 3:10 PM.
Note:
Cover orders are not allowed across F&O segments, since additional leverage is not provided for CO on index options.
Cover orders are not allowed in Pre Market session
Related articles:
1. How to place a Cover Order (CO) (5.0)?