What is Short- Selling?

What is Short- Selling?

Short selling, in the context of the stock market, is a trading strategy where an investor speculates on the decline of the share price.

In short selling, a position is open when an investor borrows the shares of the company from an existing owner through his/her brokerage, sells those borrowed shares at the current market price. For example, if the borrower speculates that Maruti Suzuki’s share will decline, the investor will borrow 100 shares at a price of let’s say Rs 5000 and sells at the current market price. Now investor is betting that the stock price will decline. If the stock prices decline to Rs 4500 the investor will buy the 100 shares from the market and return it back. Therefore, the investor made a profit of Rs 500 {5000 (selling price)-4500(buying price)}.

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