Short Position

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.

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