Short shelling

What is SHORT SELLING?

In the normal term, the investor thinks from the point i.e purchase at less price & sell at a higher price. But short selling is opposite of it i.e here we first sell the share & purchase it when the value goes down i.e when investor knows that the value of any share will go down they will start selling the share & purchase it when value comes down the difference between sell price- purchase price is a profit amount.

But, the biggest trick of short selling is that the share which investors will sell is not available with the investor. Hence, In the Intraday transaction, the seller has to purchase that share, let it be at any price. Before the closing of the stock exchange market i.e 3:30 pm.

                               Because in a day the transaction goes with the principle of 

T+2 day i.e if you have sold the share on Monday then on Wednesday the share has to be transferred to the buyer & the same applies to the buyer regarding the remittance of money.

But the thing is that if we see closely the seller has 2 days with him so, he can purchase within 2 days & can remit to the buyer. But here comes stock exchange in the picture. Every transaction has to get Know to the stock exchange on T+1 day.

 Hence if the seller will not purchase the share in intraday then the exchange will come to know about its fraud & which lead to illegal transaction know as SHORT DELIVERY.

Hence seller has to purchase the same share let it be at any price before 3:30 pm

Let take a living example of short selling done by a big investor.

While in 1980 when Harshad Mehta has manipulated the share & rose its value. Mr. Radhakrishan Damani was known about its fraud & has done short selling of the share & earn a lot of profit.

The same goes for dot.com boom when Ketan Parikh has manipulated the share price Mr.Damani has done short selling.

And one of the biggest benefits has been earn by DR.MICHAEL BURRY in 2008 USA subprime mortgage crisis.

What is short selling