What is short -selling of stocks
Let’s separate the answer in several parts: the mechanics, and the objectives The mechanics of short selling: Selling short is a bit more cumbersome than buying long. Mechanics are as follows: Borrow shares now: shares need to be available for borrow. This is a function of supply (long holders lend a portion of their long holdings) and demand (short interest from short sellers). Stay away from crowded shorts, i-e where borrow utilisation (supply/demand) >50% Sell them short: once borrow is located, sell them. You will receive cash. Buy them back at a later date, pocket the difference. Short cover decreases your cash balance. Make sure You have enough cash to cover Additional considerations are margin requirements. This varies by jurisdiction, client type etc. The objectives of short selling: This falls into two buckets: retailers and absolute players and the institutional market participants. Retailers and Long Short 1.0 If you are a retailer or an absolute player, you e...