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Friday, 4 September 2015

What is the meaning of short selling?

Short selling means the selling of stocks that you do not own.

This is used when you want to make profit from the falling stocks that you do not own. You can borrow the stocks for certain period from other party and then sell it in the market. When stock price falls, you buy the same stock at lower price and return it to the lender.

Example - If you think that Infosys share price will go down by the end of next month, you can use short selling to earn profit from this scenario. Suppose the current share price is 1000 and you think that stock will slump to 900 in next 30 days. So you borrow some quantity of stocks from stock lender for a fee for 1 month period. Then you sell the stocks at 1000. If you are lucky and price goes down to 900 in next month, you will buy the same stock in the market for 900 thus making a profit of 100 per share.


What do you think on this topic? Please express your opinion or ask any question through comment below. You can write to me at reply2sagar@gmail.com

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