Short Selling shares mean you are able to sell the share (commodity or currency) without having it.
- Short seller believes the stock price will fall
- Short seller sell the share at a current market price.
- Short seller buy the share on the open market to cover the short sell, ideally when stock price falls
- Short seller returns the share to a borrower.
Lets we assume
Mr. Ganesh believes that stock price of Wipro company will decline & he is interested to make a profit from this situation. But the problem is there no share of Wipro company available in his portfolio, So in this situation, short selling is the best option for Mr. Ganesh.
Example
Suppose Mr. Ganesh Short sell of 100 shares of Wipro at Rs 500 (10:30 Am) & sq.off position (buy back) at Rs.490 (1:30 pm) Than Profit = (500-490)*100 =10*100 = Rs.1000
Does Short Selling be Risky?
Short selling is as exactly opposite of buying a share. So is it as risky or profitable as buying shares.
Some Important Facts About Short Selling.
- Short selling only available for intraday trading.
- If you not sq.off your position before a time limit it the system will aromatically close your position at time deadline (for equity it’s 3:15 pm).
- Short available for only high volume script.
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