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Equity - Short Sell

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Short selling allows traders to profit from declining stock prices. It involves borrowing shares through securities lending and selling them, with the expectation that the share price will fall so they can be bought back at a lower price. Specifically, a trader who thinks a stock price will decline can short sell it by establishing a market position by selling shares they do not own yet. For example, selling 2000 shares of stock ABC at the current market price, then buying those same 2000 shares back at a reduced price later to return them, pocketing the difference as profit. However, there is risk since prices could rise instead, resulting in losses.

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Short Selling
What is Short Selling?
Short SellingAn adage that describes short selling is "selling high and buying lowSelling Short (Shorting) is an effective tool for traders as it allows them to profit from declining stock and index prices
Short SellingA 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 itAs the share price dips, he buys the same share at a lower price and returns it back, while pocketing a profit in the bargain
A little bit more onShort Selling
Short SellingDefinition 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
Short SellingExampleYou 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 profitHowever if the share prices increase after you have sold at a reduced price earlier, then you end up with a loss
Short SellingRemember: Always, short selling is something that is speculative to a certain extent and is done in anticipation of quick profits.
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Equity - Short Sell

  • 2. What is Short Selling?
  • 3. Short SellingAn adage that describes short selling is "selling high and buying lowSelling Short (Shorting) is an effective tool for traders as it allows them to profit from declining stock and index prices
  • 4. Short SellingA 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 itAs the share price dips, he buys the same share at a lower price and returns it back, while pocketing a profit in the bargain
  • 5. A little bit more onShort Selling
  • 6. Short SellingDefinition 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 SellingExampleYou 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 profitHowever if the share prices increase after you have sold at a reduced price earlier, then you end up with a loss
  • 8. Short SellingRemember: Always, short selling is something that is speculative to a certain extent and is done in anticipation of quick profits.