Cover Order
An intraday order that must be placed together with a compulsory stop-loss, allowing the broker to grant higher leverage.
How it is identified
Test: entry and a mandatory stop-loss are submitted as one instruction; margin is computed from the distance between them
Unit
qualitative
In depth
Because the maximum loss is defined at entry, the broker's risk is bounded and the margin required falls, which is why cover orders carry more leverage than ordinary intraday positions. The mechanism cuts both ways: a tighter stop means less margin and a larger position, so the trader is quietly encouraged to place stops too close. The stop cannot be removed, only moved in the favourable direction. Cover orders are frequently mistaken for a safety feature when their main effect is to permit a bigger position on the same capital.
Worked example
Entering at ₹500 with a compulsory stop at ₹490 defines ₹10 of risk per share. If the broker requires margin equal to twice the stop distance, that is ₹20 a share against ₹500 of exposure — 25 times leverage, and a ₹10 move against you is a total loss of the margin.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Cover Order” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.