short selling
January 13th, 2008
Short selling allows a trader to sell shares even if they do not own them, in other words taking a “negative position”. One can do this when he expect the value of the shares may come down in the market.
Allowing him to sell shares at one price and then buy them back when the share price has come down. With a large enough move in the share price, the trader can purchase the shares, at lower level and close the potion.
One has to take care if the share price goes up the trader may lose as he has to cover the shares at higher level.
In India the most traders use this option for intraday trading.