Delivery trading refers to the process of buying and selling securities or commodities with the intention of taking or making delivery of the underlying asset at a future date. Here are the steps involved in delivery trading:
- Open a trading account: To participate in delivery trading, an investor must first open a trading account with a broker. The investor will need to provide personal information, financial information, and complete any necessary paperwork to open the account.
- Research and select securities: Once the trading account is set up, the investor will need to research and select the securities or commodities they wish to trade. This may involve analyzing market trends, studying financial statements, and consulting with financial advisors.
- Place an order: Once the investor has selected the securities or commodities they wish to trade, they can place an order to buy or sell with their broker. Orders can be placed online or over the phone.
- Execution of trade: Once an order is placed, it is matched with another order from a counterparty, and the trade is executed. The price of the security or commodity is determined by supply and demand in the market.
- Delivery and Settlement: Delivery and settlement of the underlying securities or commodities occur in T+2 days (i.e. 2 days after the trade date) where the buyer and seller have to deliver the securities and cash respectively.
- Clearing and Settlement: Clearing and settlement of the trade takes place through the Clearing Corporation/Depository where the shares are transferred and cash is settled.
Delivery trading can be a complex process, and it is important for investors to fully understand the risks and regulations involved before engaging in this type of trading. It is also important to note that delivery trading is a settled trade which means that the shares are physically delivered to the buyer and cash is settled to the seller which is different from Intraday or derivatives trading.