How squaring off works
| Open position | Square off by |
|---|---|
| Bought shares intraday | Selling the same quantity the same day |
| Short sold shares intraday | Buying back the same quantity the same day |
| Long futures or options | Selling the same contract and quantity |
| Short futures or options | Buying back the same contract and quantity |
Auto square-off
Positions taken in an intraday product, such as MIS, must be closed the same day. If you do not close them, your broker squares them off automatically shortly before the market closes.
- The cut-off time is set by each broker, usually in the last 15 to 20 minutes of the equity session, and before the close for commodities.
- Many brokers charge a fee for auto square-off.
- The broker uses a market order, which can fill at a poor price in a fast or thin market.
Brokers may also square off positions during the day if your margin falls short, or before expiry for in-the-money stock derivatives that would need physical settlement.
Squaring off vs letting a contract expire
An option or future can be squared off any time before expiry, or held to expiry. At expiry, index derivatives settle in cash, and stock derivatives settle by delivery. Squaring off before expiry avoids delivery and the last-day swings in option prices.
Squaring off multi-leg positions
For spreads and other multi-leg strategies, square off the short legs first or all legs together. Closing the bought hedge first leaves a naked short position, with higher margin and risk, even if only for a moment. See the hedge margin benefit.
Square-off in automated trading
Automated strategies usually include a time exit, such as 15:15, so positions are closed by the strategy before the broker's cut-off. In QuantPower, an MTM stop loss squares off all positions when the day's loss or profit reaches a set level, and the strategy builder can add time exits to every strategy.
Related terms
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Frequently asked questions
What does square off mean in the share market?
Closing an open position with an opposite trade of the same quantity, such as selling shares you bought earlier that day.
What time is auto square-off?
It is set by your broker, usually in the last 15 to 20 minutes of the session. Check your broker's timings.
Is there a charge for auto square-off?
Many brokers charge a fixed fee plus GST for each position they square off.
Can I square off part of a position?
Yes. You can close part of the quantity and keep the rest open, in whole lots for F&O.