Previously in this column, we discussed Buy Today Sell Tomorrow (BTST) trades. We showed why futures are preferable to options for initiating BTST trades. This week, we discuss another aspect of the BTST trade: Why futures are preferable to the spot (cash) market. 

Futures vs cash

An obvious benefit of trading futures over cash market is that the former is a leveraged trade. That is, you are required to only post initial margin when you initiate the position and mark to market margin, when the position moves adversely. You must pay the full contract value only if you keep the position open till expiry. Transactions in the cash market, on the other hand, require payment of full contract value when the trade is executed.

Also, based on the current SEBI regulation, BTST trades initiated in the cash market have a cash flow disadvantage compared to that in the futures market. Suppose you go long on a stock on Monday and sell the shares on Tuesday, the sale proceeds will be only available to you on Wednesday. That is, your broker will not allow credit of the sale proceeds in your trading account on Tuesday because the settlement of your purchase on Monday is still pending. On the other hand, if you were to go long on a futures contract on the stock on Monday and close the position on Tuesday, the margins are immediately unblocked.

While the gains may be unavailable till the next day, you have the benefit of using the initial margin as capital for the next transaction. You cannot use the capital blocked in a BTST trade in the cash segment till the next day. Note that most brokers use the term BTST with respect to the cash segment and not the F&O segment. Nevertheless, the fact remains that you can use the cash segment or futures to buy today near the end of the trading day and sell tomorrow, preferably during early trade.

Within the futures segment, should you prefer index futures to single-stock futures for BTST trades, given that index futures are cash-settled whereas singles-stock futures are delivery based? It does not matter as BTST trade requires you close the position during early trade on the day of expiry. So, the choice between index futures and single-stock futures should be based on your view of the underlying. 

Optional reading

Using futures over the cash segment is primarily a cash flow strategy. Note that we compare cash and carry trade with futures and not trades that you can initiate using margin trading facility. Given the leverage benefits and the release of margins, you can use your trading capital effectively if you use futures. But futures are available only on a specified list of securities. What if you identify good opportunities to set up BTST trades on other stocks? It may, therefore, be optimal to allocate a predetermined proportion of your trading capital for such trades. 

(The author offers training programs for individuals to manage their personal investments)

Published on June 6, 2026