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Short selling (stocks): Difference between revisions
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* Steps 1. borrow stock and sell at current price 2. buy back at certain date at present value 3. pocket difference | * Steps 1. borrow stock and sell at current price 2. buy back at certain date at present value 3. pocket difference | ||
{{#mermaid:graph TD | |||
subgraph "STEP 2. BUY TO CLOSE" | |||
SS1[SHORT SELLER]--MUST RETURN THE BORROWED SHARES-->2[BUYS THE STOCK AT NEW PRICE ex. $80]--MUST RETURN THE STOCK TO-->SO2[ORIGINAL STOCK OWNER] | |||
end | |||
subgraph "STEP 1. SELL TO OPEN" | |||
SO[STOCK OWNER]--LOANS TO SHORT SELLER usually for a fee-->SS[SHORT SELLER]--SELLS THE STOCK-->1[KEEPS THE CASH ex. $100 per share] | |||
end | |||
}} | |||
{{#mermaid:graph LR | |||
subgraph "PROFIT" | |||
3[SELL TO OPEN]--SELLS BORROWED SHARES FOR $100-->4[BUY TO CLOSE]--BUYS BACK STOCK AT <BR>NEW PRICE TO RETURN TO OWNER-->1[PROFIT = $20] | |||
end | |||
}} | |||
[[File:Short_(finance).png|alt=|frame|Schematic representation of physical short selling in two steps. The short seller borrows shares and immediately sells them. The short seller then expects the price to decrease, after which the seller can profit by purchasing the shares to return to the lender. (wikipedia)]] | [[File:Short_(finance).png|alt=|frame|Schematic representation of physical short selling in two steps. The short seller borrows shares and immediately sells them. The short seller then expects the price to decrease, after which the seller can profit by purchasing the shares to return to the lender. (wikipedia)]] | ||
[[Category:Social studies]] | [[Category:Social studies]] | ||
[[Category:Economics]] | [[Category:Economics]] | ||