What is Short Position?

Business & Management
#1

Short Position: First you will sell, and then you will buy to cover the existing position. In a short position, you borrow shares from your broker and later on return it to the broker at the same rate as when it was borrowed If the price goes down you pocket the difference else you compensate the difference.

If you feel that share price of ABC company will go down, then you can short sell(First you will sell, then buy back them later) the shares of ABC company. That conveys you’re holding short position in ABC company.(or you’re on the short side)

Example:

  • Short Position: 10:00 AM You short sell 15shares of ABC company @₹100

  • 11:00AM you covered your existing short position by buying 15shares of ABC company @₹97

  • Profit =15*(100–97)=₹45