Define Selling Short Of Stock
Typically, when a person trades in stocks, they buy them at a certain price and then sell them for a higher or lower price, depending on the market conditions. This is the usual process for selling and purchasing stocks. There are different ways in which a person might buy or sell. It can be done directly or through an investor or a broker. |
|
Depending on the procedure, the profits and losses are made. When an investor believes that the price of the stock is going to increase and then buys a stock, it is called a long investment. When an investor believes that the price is going to fall and still buys the stock, it is called a short sale. This might sound very confusing to you, but in reality it is very simple to understand.
In the case of a short sale, there is always an investor in the middle. In this case, the broker actually lends the shares to you. They take it from an inventory of another customer and give it to you. It may also come from a different brokerage firm. The shares are sold at a given price on a given date and then the income is forwarded to seller's account. However, the seller must close the short sale by buying back exactly the same number of shares and giving them to the broker. This sale happens on a set period of time which is predetermined. You may purchase it at a lower price as predicted by you and make a profit over the difference or you may purchase it at a higher price and suffer a loss. It can be said that selling short of a stock is quite similar to gambling.
More Articles :
|
