Real life analogy:
On a long side: You would buy a book for $10 and sell them later to a friend for $15. You profit $5!
On a short side (short selling): You would borrow a book from a library, and then sell it to a friend for $15. However, you still need to return that book to library later. So you went online and got the same book for $10 and return it. You profit $5!
Below are 4 simple steps on how to short sale a stock:
1. Identify a company that you think will decrease in value (short or long term).
2. Type in ticker symbol on your trading platform, put share price you wanted to short and number of shares, then click sell or short (depending on trading platform) instead of buy button. Or you can call your broker and tell them you want to short sell XYZ for X number of shares for example. After your order is filled you will see MINUS sign in front of your position, which indicates that you are shorting it.
3. To close your short position, you need to buy back (or what they called cover) X number of shares that you’re shorted.
4. Below is an example of me shorted (borrowed shares from broker and sold them) POT for 100 shares at $42.90 and now market price is at @41.28, I am so far profiting $1.62/share (on a short side) or about $162. To take my profit I have to cover(buy) 100 shares of POT.
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What do you think about short selling? Is it something that you would consider doing when the market is down? Please leave your comment below.
