ಶಾರ್ಟ್ ಸೆಲ್ಲಿಂಗ್ || what's the short selling in share market || how it works ||
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What's the short selling:
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Short Selling Overview & Risks
Short selling is a trading strategy where an investor borrows a security, such as a stock, and sells it with the hope of buying it back at a lower price to make a profit.
In short selling, the investor borrows the security from a broker, who in turn locates the shares from its own inventory or another customer's account. The investor then sells the borrowed shares on the market, hoping that the price will decrease so that they can buy back the same number of shares at a lower price and return them to the broker. The difference between the sale price and the purchase price is the profit made by the investor.
However, short selling also carries risk as there is no limit to the potential loss. If the price of the security increases instead of decreasing, the short seller will have to buy back the shares at a higher price and incur a loss. The loss is potentially unlimited as the price of the security can keep rising.
Short selling is often used as a hedge against market uncertainty and as a way to speculate on the decline of a specific stock or market. It is also used by institutional investors to manage risk in portfolios and by market makers to provide liquidity to the market.
Regulations regarding short selling vary by country. In the US, the Securities and Exchange Commission (SEC) has implemented various rules, such as the uptick rule, which restricts short selling on declining stocks, and the alternative uptick rule, which allows short selling as long as the current price of the security is above the previous price.
In conclusion, short selling is a trading strategy that can be used for both hedging and speculative purposes, but it also carries significant risk. Investors should be aware of the regulations and potential risks before engaging in short selling.
