What is Short Selling of Shares?
Short Selling of Shares is a trading strategy where the trader anticipates that the price of the stock or other assets is going to decrease. So, to make a profit in the falling market, they sell the shares by borrowing them. Once and if the price falls as per their expectation, they buy the shares and return the same. The profit is the difference between the selling price and the buying price of the shares. However, the risk is unlimited as the share price can go up against the anticipation of the trader to any amount.
If you are thinking of adopting this strategy, you should know these facts first –
- The shares sold are borrowed shares and not owned shares
- Anyone can short sell irrespective of retail or institutional investment factor
- It is completely based on speculation
- Traders are obliged to return the shares they have borrowed from the market on the expiration date
- It generally happens when bears rule the market that is in a bearish market
Can I do a sell of stock before purchase?
Yes, short sell of stock is allowed method where any share ca be sell before purchase. Place a purchase order for the qty required to short sell of a share and which can be purchase again in intraday basis.