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What is Short Selling?
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18-Sep-13 04:04PM
Short selling means selling the securities which you didn't buy at all. The term short here signifies that you do not hold the securities being sold. The first thought strikes up would be – where do these shares come from which you are going to sell without possessing them in your account. Your borker/brokerage firm lends you the securities which you can short sell in the market on behalf of your investments lying with them. You short sell these shares but subsequently you have to close the short by buying back the shares from market and then return to your broker/brokerage firm. You have to pay some comission/interest for the loan of shares you have taken. Below diagram will help you to understand the process of short sell.
Short selling no doubt gives you an opportunity to earn profit by taking advantage of bearishmarket, you may also in huge loss to your investments if stock market turns bullish.
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