Cover Order
An intraday entry with a non-negotiable stop-loss baked in — the exchange-mandated stop defines your worst-case loss and can unlock lower margin from your broker.
Definition
A cover order (CO) is a two-leg intraday order type offered by NSE and BSE-registered brokers. The first leg is the entry — either a market order or a limit order for the buy or sell side. The second leg is a mandatory stop-loss trigger order that is placed simultaneously and cannot be deleted as long as the entry position remains open. Unlike a bracket order, a cover order does not include a target leg — the trader must manually square off the position at profit, or the stop-loss leg handles the loss exit. Like bracket orders, all cover order positions are compulsorily squared off before end of session.
Why it matters
The primary benefit of a cover order is margin efficiency. Because the broker and exchange know the maximum per-unit loss the position can incur (the distance between entry and stop-loss), they can block a proportionally smaller margin than they would for a standard intraday position. This can be particularly material in the F&O segment, where SPAN margin requirements for Nifty and Bank Nifty futures are substantial. For traders who use leverage aggressively but want to trade with discipline, the cover order enforces what many retail participants struggle to enforce manually — that a stop-loss is placed immediately at entry and never removed in hope of a reversal. SEBI's peak margin norms, introduced in phases between 2020 and 2021, have tightened intraday leverage across brokers, but cover order margin benefits remain available on eligible instruments.
How it works
When you place a cover order, the broker's system submits the entry leg to the exchange. Once the entry fills, the stop-loss trigger leg is simultaneously activated in the order book. For a long cover order, the stop-loss is a sell trigger set below the entry price. For a short cover order, it is a buy trigger set above the entry price. The stop-loss leg converts to a market or limit order when the LTP hits the trigger. You can modify the stop-loss to a tighter (more favourable) level during the trade, but you cannot widen it or delete it outright — doing so would require converting the order type or closing the position first. If you wish to take a profit target manually, you square off the position through a separate market or limit order, after which the system cancels the pending stop-loss leg automatically.
Example
Suppose Nifty 50 futures are near 24,400 and you want to go long for an intraday scalp with a stop at 24,350. You place a cover order: entry market buy at current price, stop-loss trigger at 24,350. The entry fills at 24,402. The stop-loss trigger at 24,350 activates. If Nifty rallies to 24,480 during the session, you manually place a sell market order to book the profit — the stop cancels automatically. If Nifty falls instead and hits 24,350, the stop fires and exits you around that level. At no point during the trade can you simply decide to remove the stop — the system will not permit it, which protects both you and the broker from uncontrolled overnight risk.
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