3. Short Selling An adage that describes short selling is "selling high and buying low” Selling Short (Shorting) is an effective tool for traders as it allows them to profit from declining stock and index prices
4. Short Selling 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 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
6. Short Selling Definition of "Selling Short": 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 Lets simplify and understand with an example in the next slide
7. Short Selling Example 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 The difference in the prices of the selling and buying is your profit However if the share prices increase after you have sold at a reduced price earlier, then you end up with a loss
8. Short Selling Remember: Always, short selling is something that is speculative to a certain extent and is done in anticipation of quick profits.
