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Stages of completion of the Short Selling
What are the stages of completion of the Short Selling?
To clarify the various dimensions of the sale of borrowed stock has been divided into the stages of the process into three basic stages:
A - a borrow securities and sell them on the market (Short Selling).
B - the retention of a cash sale with the investor in his own favor to the broker in addition to the margin decision.
C - the stage of the purchase of securities (Repay the Loan).
First: a borrowing of securities and sell them on the market (Short Selling)
• This phase will start upon receipt of the mediator is the desire of investors to sell a number of securities that are owned and there is no investor in his possession.
• the intermediary work of all the procedures associated with the implementation of this is where the borrowing of such securities (on behalf of client) of investors (whether individuals or institutions) who wish to lend Eetmkouh of the securities.
These are actors in the following: • The median is the implementation of the sales by selling borrowed securities that the market value and deposit the proceeds of the sale of these in the calculation of the investor. And after that any investor to deposit part of the price of the transaction in the account (50% for example) to the mediator and one of the measures (safeguards) Procedure for the completion of the Short Selling
Second: the retention of a sale with the investor in his own favor to the broker.
• The balance of cash deposited in the investor's account before the implementation of the sale of its obligations as Collateral for the need to re-purchase of shares borrowed and sold by Short Position.
• In the case of the high price of the securities borrowed, which was sold in the market is large and cover this situation, the mediator is the so-called b Maintenance Call with requests from the investor to increase the value of the Collateral consistent with the market value of the securities, a so-called Marked-To-Market .
• The method is similar to a large extent with what measures were being taken in the case of the purchase of securities margin Margin Trading. Where the investor to develop a cash balance account equal to the median of Margin required in the case of buying the same number of shares in the case of replacing the sales decline in the value of the paper in the market to be invested to increase the value of its cash account with a broker.
III: the stage of the purchase of securities (Repay the Loan)
• contracts are securities lending Lending Agreement as open-ended "Open" or constantly renewed "Continuing" and renewed a daily basis, with a characteristic value of the security amendment to the Financial Collateral according to the change in market value of the stock sale replace Marked-To-Market.
• There are two cases in which the purchase of what has been borrowed from the securities in order to be delivered to the borrower:
- First case:
Is the initiative of the investor borrower (Short Seller), when the rate of decline in the securities market and enable it to achieve the target, where the profits from the purchase of the same number of stock market price of the market (less than the price at the sale of borrowing) and returned to the lender's Lender and retention including from the profits made after deduction of commissions assessed.
- Second case:
And the lender may terminate the contract of loan by informing the mediator who facilitated the process of lending to the so-called b (Recall Notice), in which case the investor is committed to the borrower (Short Seller) has been re-borrowed from the securities. And the borrower to the investor (Short Seller) two options:
With the purchase of securities borrowed from the market or current Bsaara investor can borrow, the borrower (Short Seller) the same number of securities obligated to return to the lender and the lender of the last cases in which it is difficult for investors to find the borrower the lender another (this often happens in the market similar) to have such securities as in the case of the so-called "Short Squeezes" There are no investors, the borrower "Short Seller" only with the purchase of the number of securities borrowed from the market regardless of the profit or loss.
* If the borrower has not been able to (Short Seller) the securities in time for settlement (The Standard Settlement Time) may be the lender to purchase the same number of securities to use Cash Collateral held in the borrower's account. And the borrower remains responsible for any additional expenses borne by the lender while in the implementation of this procurement.
In all cases, the investor would be responsible for restoring the borrower of securities of the Bagtradha in addition to all the rights they have acquired during the period of the loan, such as distributions of cash and paper, as well as the number of shares in the new retail stock (Stock Split), where the borrower is committed to the return of the investor the equivalent number of securities by Bagtradha. Be paid the additional burden of securities acquired at the end of the contract and upon delivery of the securities to the lender.
The implications on the willingness of the lender in the collection of timely distributions of the issuer to the lender is obliged to return the borrowed securities at a specified date, in Japan, for example, as a result of the tax treatment of distributions, we find that most lenders require the restoration of their shares prior to the date of registration so that distributions to owners in the paper the date of distribution.
With respect to the voting rights of the lender's shares lose voting rights that are owned for the benefit of investors who bought those shares in the market. In other words, that the owners or holders of securities the time of the General Assembly are the ones who have the right to vote.
Thus, in the case of the desire of the lender in the presence of the General Assemblies have been the restoration of shares of the loan through the issuance of the so-called "Call notice" before the deadline of the General Assembly.
12:54 PM | Labels: Online Trading | 0 Comments
The difference between the Margin Trading and Short Selling
What is the difference between the Margin Trading and Short Selling?
Is each of the modes as the other side of the coin of the other way, for example, is in the case of purchases on the margin to open a special account called the Margin Account from which the investor bought the stock after the payment of part of the value of the process would be to retain these securities in this account. And shall apply to this account some of the legal measures and procedures
As well as in the case of the sale of borrowed securities is also opening a special account in the Margin Account, where the investor to sell securities after the repayment of the borrowing part of the value and the value of the transaction are maintained and paid by the investor in this account and shall apply to this account of legal and procedural measures similar to a large extent to those that apply to purchases on the sidelines.
8:21 AM | Labels: Online Trading | 0 Comments
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 | Labels: Online Trading | 0 Comments
Short Selling
Short Selling
• Out on the sidelines is a process of borrowing funds to maximize the purchasing power of the equity shares guarantee that ..... And the sale of borrowed securities is to sell the stock before you buy, but not before borrowing .......
• Out on the sidelines is a tool to activate a optimists ........ And the sale of borrowed securities is a tool to activate a pessimistic ......
• Out on the sidelines curb a rise to rein in the future ........ And the sale of borrowed securities is a tool to rein in rein in a sharp decline ...... • Out on the sidelines is a tool to activate a optimists ........ And the sale of borrowed securities is a tool to activate a pessimistic ......
Q: What is the concept of Short Selling?
Short Selling is one of the mechanisms used by investors in the stock markets to achieve profitability in the case of the direction of stock prices downward, where it is believed most of the newly dealers in the stock markets that the only way to profit is to buy shares that are expected to rise in prices in the future, if the expected decline in share prices in general in the future was thought that the best way available to investors is to stay out of the market to avoid losses to achieve.
In the case of a system of Short Selling in the opposite happens resort Speculators to use this method if the predicted decline in stock prices in the market with the aim of achieving capital gains from the decline in stock prices. , Where traders sell these securities do not Eetmlkunha a market price basis and after a Bagtradha from other investors (for a commission) and then to buy from the market after a decline in price and what is the difference between the net value of the sale of such securities and the cost of borrowing to buy them in order to repay this loan as capital gains accruing to speculators that the use of the tool.
What is the difference between a Long Position and Short Position?
Said that the investor has a Long Position in securities if these securities has (whether equities or bonds) in the self-employed. On the contrary, where the investor is said to enjoy the so-called Short Position if the borrowing securities and selling them without re-operation to cover the purchase of the shares sold.
9:50 AM | Labels: Online Trading | 0 Comments
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