Short Selling<br />An adage that describes short selling is "selling high and buying low”<br />Selling Short (Shorting) is an effective tool for traders as it allows them to profit from declining stock and index prices<br />
Short Selling<br />A trader goes short when he anticipates that the price of such stock will fall from the existing price i.e. he borrows shares through Securities Lending & Borrowing Mechanism (SLBM) Segment of Exchange(s) and sells it<br />As the share price dips, he buys the same share at a lower price and returns it back, while pocketing a profit in the bargain<br />
Short Selling<br />Definition of "Selling Short": <br />Selling Short implies establishing a market position by selling a security one does not own, in anticipation that the price of the security will fall<br /> Lets simplify and understand with an example in the next slide<br />
Short Selling<br />Example<br />You anticipate stock ABC will decline and enters order to SELL 2000 shares of ABC at market price and later buy the 2000 shares of ABC at a much-reduced price <br />The difference in the prices of the selling and buying is your profit<br />However if the share prices increase after you have sold at a reduced price earlier, then you end up with a loss<br />
Short Selling<br />Remember: Always, short selling is something that is speculative to a certain extent and is done in anticipation of quick profits.<br />
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