--- title: "How do people pair trade in India without shorting stocks" description: "In India a retail account cannot generally carry a cash market short overnight." source_url: "https://www.rupeecase.com/learn/questions/pair-trading-without-overnight-shorts" --- A pair held over several sessions in India runs on futures, so lot, roll and ban rules enter the test The checks that come before a futures pair is tested, from the cash rule to the net result. A map of method, not a recommended pair. Source: RupeeCase method map; NSE contract specifications. As of 16 Oct 2026. The textbook pair trade buys one stock and sells another, then holds the short leg until the spread comes back. In the Indian cash market a retail account cannot generally carry a short overnight: an intraday short is squared off the same day, and borrowing shares to carry one is thin. So a position meant to last several sessions cannot use cash shares on the short side. The common workaround uses futures. Both legs are stock futures, one long and one short, sized by a hedge ratio. Futures allow a short exposure that can be carried into the next session, but they come with a lot size, a margin, a daily mark to market and a monthly expiry that forces a roll. Stock futures settle by delivery at expiry, so both legs are closed or rolled before then. Each of those frictions changes the test. Lot sizes make the hedge ratio lumpy, so the hedge is only approximate. A roll in expiry week adds a cost and can move the basis. An F&O ban on one stock blocks new positions in that leg, so the pair can be stuck half built. The flow below lists what to check before a futures pair is tested. Each step is a place where the paper result stops matching what a trade would have earned. Costs belong in the test from the start. Futures carry STT on the sell side, brokerage and fees on both legs, and the spread on each leg when the position is entered and exited. A pair that looks good before those costs can look different after them. **Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) How do people pair trade in India without shorting stocks overnight?In India a retail account cannot generally carry a cash market short overnight, so a pair meant to last several sessions usually runs on stock futures for both legs. Futures bring lot sizes, rollovers, F&O bans and margin into the test, and each of them changes the trade that was first tested on paper. LGo deeper ## Where Learn teaches this. [Go deeperPair trading with Indian stock futures10 min, Advanced](/learn/path-18/module-18-8-pair-trading-with-stock-futures)[Go deeperContract specs that matter now: lots, expiry days, strikes and settlement9 min, Beginner](/learn/path-12/module-12-4-contract-specs-lots-and-expiries) SSources ## Go to the source. 3 sources, SEBI the most cited The publisher of each source listed below. Source: Module undefined source list. 1. [NSE, equity derivatives contract specifications (lots, expiries and settlement used in the examples)](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE 2. [SEBI, physical settlement of stock derivatives (circular, 31 Dec 2018)](https://www.sebi.gov.in/legal/circulars/dec-2018/physical-settlement-of-stock-derivatives_41482.html) SEBI 3. [SEBI investor education, Understanding derivatives](https://investor.sebi.gov.in/understanding_derivatives.html) SEBI ?Questions people ask ## Related questions. 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