What does short selling stock mean?

Question

If I buy a stock and 2 weeks later, it gains 25% and sell it. Does this mean short selling. Also what would be the tax when file for income tax that year. Thx!.

Answer 1

no
selling short is when you sell something you don't own
you borrow the stock from your broker and sell it,, with the expectation the stock price will fall in price,, then when/if it does fall to a point you like,, you buy the stock to repay your broker. You make money if the stock goes down,

Answer 2

Two people look at stock xyz. It is going for about $20 in this example. Earnings reports are about to come out. Some say that it will make almost twice the earnings that they previously announced was their target. Others say, dismal news is in store, they may have to restate some figures. Which way will the stock go?

Person A buys the stock hoping it goes up. Person B sells it short, expecting it to go down. In this latter case, person B's broker has oodles of xyz on their books, so they sell the shares on person B's behalf, a loan of stock.

Person A pays $20 (plus commission) per share and person B technically gets $20 a share (but it is probably put on hold, depending on their account guidelines).

If the stock's news is good, the stock rises, to $25, say, and looks like it will keep going. Person A is sitting on a $5 a share paper profit, so he can sell or hold on for more. Person B is hoping for a retreat in a day or two because if he had to "buy to cover", it will cost $25 a share (plus commission) to buy back the stock that the brokerage loaned him. For a hundred share block, person B just lost $500.

If the stock news is dismal, person A watches the stock go to $15, so his position is diminished by $500 for a block of 100 shares. Person B, meanwhile, can simply "buy to cover" at $15, which effectively returns the stock to the broker, and keeps the difference, an earnings of $500.

As for taxes, what is the basis value? If you shorted, the basis value is the acquistion price. If you went long, the basis value is the acquisition price. Either way, it is the difference between purchase and sale, either way a proper position made the profit and is taxible (although if in your IRA, the tax may be deferred and the accounting simpler, but stranger).

Answer 3

When you buy a stock and then sell it later that is called a "long" position. You take a long position in a stock when you believe it is going to go up in price. A "short" position is where you actually sell the stock first, in hope that the price will fall. You then buy the stock at the lower price keeping the difference as a profit. The way you short sell a stock is you are actually borrowing the shares that you intend to sell from your broker. Once you buy back the shares they are returned to the broker. I hope this helped.

Answer 4

Short selling basically means selling a stock which you do not own. It works when you tell your broker that you want to short a particular stock. Your broker would help you by borrowing the required stock and quantity from other sources and sell it to the market. Please note that you may incur on-going charges for short selling as it works like a loan. The longer you short, the higher the charges. It applies the principle of "buy low, sell high" but this time you "sell high first, then buy low later". If you are bearish on stock, you may consider shorting it then. On a word of caution, shorting tends to be higher risk than longing (the normal buy first, sell later).

Answer 5

Borrowing stock from a broker to sell at the market, who takes a commission of course, so that later one can but back and return the same stock to the broker at, (the objective would be), a LOWER price. It is the mirror image of owning a stock. Any upward stock price is a tanking of your wallet.

Answer 6

if you short sell you want it to go down,not up, you borrow a stock and sell it, keep the cash, then later on you buy the stock and replace what you borrowed, if it goes up that means you pay more than you received,
you hope it goes down and you keep the difference

Answer 7

short selling is borrowing stocks and selling them back only of the stock goes down can you win.