In "selling short" a stock, you make a bet that its share price will go down, not up. Shorting is a three-step process:
First, you borrow shares from someone who owns them; then you immediately sell the borrowed shares; finally, you replace them with shares you buy later. If the stock drops, you will be able to buy tour replacement shares at a lower price.
The difference between the price at which you sold your borrowed shares and the price you paid for the replacement shares is your gross profit (reduced by dividend or interest charges, along with brokerage costs).
However, if the stock goes up in price instead of down, your potential loss is unlimited-making short sales unacceptably speculative for most individual investors.
*Above sentences are copied from "The Intelligent Investor" .
Do you guys know whether bursa allow us to selling short? I saw there are some stocks are allowed to do and Airasia is one of them..
First, you borrow shares from someone who owns them; then you immediately sell the borrowed shares; finally, you replace them with shares you buy later. If the stock drops, you will be able to buy tour replacement shares at a lower price.
The difference between the price at which you sold your borrowed shares and the price you paid for the replacement shares is your gross profit (reduced by dividend or interest charges, along with brokerage costs).
However, if the stock goes up in price instead of down, your potential loss is unlimited-making short sales unacceptably speculative for most individual investors.
*Above sentences are copied from "The Intelligent Investor" .
Do you guys know whether bursa allow us to selling short? I saw there are some stocks are allowed to do and Airasia is one of them..
1 comment:
Bursa allows a constraint short selling, if i am not mistaken:
1. Limit to certain stocks
2. Need to find willing borrower for the stocks that you going to short and inform Bursa that you are planning to short!!
3. I think the process is not that fast enough to be an attractive plan to do short selling!!
4. There is alot more constraints. :P
Hope i get the above right,as when this plan came out like 2-3 years ago, it got lukewarm response.
KnowThyMoney
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