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Browse: Home / MONEY / Selling

How do you profit from short selling, and how does it work?

nofaction1: How do you profit from short selling, and how does it work?
I usually just buy stocks that the public drives the price up and then sell. I’ve made about 39% in one month doing this. I know I can make alot more, I just don’t understand short selling.

Answers and Views:

Answer by muneepenee
1. yu sell it & hope yu kan bi it bak for 0$ .
Tu duit, broker gotta borro the shares from sumwon & yu gotta put up nuff kolateral tu bi it now.

Answer by Patrick
Short selling works by borrowing stocks you don’t own from someone else and then selling them. You then buy them back up at a later point when they are worth less and give them back to the person who gave you the stock.

If you want to create a portfolio, lets say you have $ 1000 to invest, you can give each security you are going to go long or short on and give them a weight. Like 115% in stock A and then -15% in Stock B, just so long as the total equals 1, multiply the weights * $ 1000 and that’s how much you invest in each stock.

Answer by Avi.Sethi_FINA4242
Short selling is basically the act of trying to make money on the price of a stock going down. If a stock in selling at $ 100/share, and you short sell, you are hoping that the price will go down and you will make the difference between the new price and the original price ($ 100).

In practice, you need to own shares before you can sell them, so in the case of short selling you borrow the shares from someone and then sell them. Once you have gained/lost sufficient money, you give back the borrowed shares by “covering” your investment.

One note on short selling: In the case of buying a stock you have an unlimited upside and a limited downside. This means that, if a stock is selling at $ 100/share, your investment can go up to infinity or down to 0. The reverse of this is true for short selling, as the best you can do in a short position is to make only as much money as the stock is trading for, and the worst you can do is owe an infinite amount of money to the person you borrowed from.

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