What is a Short Position?
A short position is a practice where an investor sells a stock that he/ she doesn’t own at the time of selling; the investor does so by borrowing the stock from some other investor on the promise that the former will return the stock to the latter on a later date. Advantage of Short Position:
Short selling is beneficial for the capital market in many ways. It provides liquidity; it helps to correct the overvalued stocks.
Proponents of short selling claim that short selling practice improve the efficiency of the market and it deters promoters of the company from doing activities to manipulate the stock prices.
The short position gives the investors to make money not only when stocks go up but also when the stock goes down.
Short selling will also act as a hedging tool.