Pls explain short selling in stocks & future?

Answer 1

In short selling, you sell something you do not own, you have to borrow it first. If the price falls you buy it back and repay the loan for a gain. If the price increases you may either need to do nothing, add additional collateral or repay the loan.

In futures it means you are selling something in the future and are now obligated to do so.

Answer 2

Short Selling in F&O is selling now and buy later.

In Future Short Selling means you are selling something in future for the current price. In future you do not have to hold share you want to trade neither you have to make the settlement in delivery. In India, Future transactions are settled only in Cash.

For Example,

If you short sell 1 lot of REL (Reliance Energy Limited) which has 550 Shares in one lot. The selling price is say 500 Rs. So you will make profit in these stock only if the price of it goes down.

If the price of REL goes down to Rs. 450 and you square off your position (Square off in this case means Buy what you already have sold) so you will make profit per share at Rs. 50 totalling 500-450=50 Per Sharex550 shares = 27500 Rs.

The opposit of short sell is "buy Long" in which you buy first and then square off i.e. sell.

When you think the Market is bearish and the price of the stock will fall down then you go for the "short". and when you think that the market is booming and the price of the stock will go up then you go for "long".

In simple words, Short means sell now and buy later and Long means Buy now and sell later.

Answer 3

short selling is basically selling (and borrowing) stocks you don't own to somebody else in hopes that the price will go down when you buy it back to replace.

You sell short 100 shares of ABC @ $32/share. When the price goes down to $28/share, you buy it back later, to return it from where you got it from. You pocket the $4/share difference minus fees, of course.

The risk in this is if the price goes up. If that happens, you may have to buy it back at a higher price than what you sold it for. So if the price went to $35/share when you buy back, you lose $3/share.

Everyday example:
you have a friend who needs to bake a cake & need 10 pounds of sugar (alright he needs to bake a lot of cakes!). Your friend sees that sugar sells at the store for $10 for a 10 pound bag, so he gives you $10. You borrow 10 pounds from your neighbor & tell them you will give it back next week. You know that sugar will go on sale next week so you wait. You buy it back for $7. Your friend made the cakes, your nieghbor has his sugar back, you got 3 bucks for a slice or 2 of cake.