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Why resort investor to Short Selling?
Why resort investor to Short Selling?
There are two main reasons for resorting to the sale of borrowed securities, namely:
1 - Speculation
Are speculative - as mentioned earlier - a decline in the price of paper in the market, rather than vice versa, in the case of the low price of the securities in the market achieved a profit if the speculative buying securities in order to return to the borrower in the case of the high price of the securities in the market is speculative, the losses a result of buying the paper at a higher price than the time of sale the lender borrowed from the investor
2 - Hedging
And resorted to the investor in case the uncertainty of the direction of movement of the prices of securities in the process of Hedging helps to protect the investor from the lower price of the paper in the market, for example: If the investor owns the securities (Long Position) believed that the price in the market will follow an upward trend in the long This was a long and investor fears have been achieved to reverse this trend in the short term can, in this case asylum for Short Selling for the protection of the securities owned by financial (Long Position) This process is called (Short Selling against the Box), so that in the case of the low price of that paper can The investor would then preserve the value of existing investments in the repurchase of these securities borrowed in the case of the high price of paper in the market, it can then use the investor-owned papers in the payment of this loan. Without any loss in the case of the availability of borrowed shares to him.
8:46 AM
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Online Trading
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