In trading, you may often hear people discussing how to make a profit when the stock price is trading, i.e. "going short". So, how do you do it empty?This article will share with you three commonly used methods of shorting, so that you can have a deeper understanding and participate in this ** trading full of opportunities and challenges.
Selling is a typical shorting strategy where an investor borrows from a broker and sells immediately. Their goal is to buy these back at a lower price in the future and then return them to the broker. This way they can earn the difference as a profit.
When you trade on securities borrowing and lending, you need to deposit a certain amount of margin in your account. This is to allow the broker to ensure that you have the financial resources to return the borrowed money**. Different brokerages may also give different conditions for securities borrowing and lending, such as requiring you to pay a certain amount of interest.
As an example, let's say you think a company is about to be. You borrowed 100 shares of the company** through a brokerage broker at a market price of $10 per share, for a total of $1,000. Then, you immediately sell the 100 shares** at the market price. After a while, sure enough, the company *** to 8 yuan per share. At this point, you buy back 100 shares** at a cost of $800, and then return the 100 shares** to the brokerage. Your profit is $200 ($1,000 sold - $800 back), minus the fees charged to you by the broker, of course. When borrowing and lending, we need to carefully consider the conditions of securities lending by brokers, so as to avoid all profits being collected by brokers.
A stock index** is a financial contract whose value changes in response to the movement of a specific index** such as the Shanghai Composite Index or the Shenzhen Component Index. Selling a stock index is when you sell the contract and then wait to buy back the same contract at a lower price, earning the spread.
For example, let's say the CSI 300 index is now 3,000 points. Do you think that due to certain economic factors, this index will be **. So, you decide to sell a stock index** contract based on the CSI 300 Index. After some time, let's say that the index reaches 2800 points, then the value of the stock index contract associated with it will also be the value. At this point, you can buy back the previously sold contract at a lower price to close the position.
It is important to note that stock indices** usually involve leverage. In other words, a small fluctuation in the stock index will be amplified in the stock index market, resulting in greater volatility, and the risk will increase. If the market moves in the opposite direction of yours, it can cause significant losses.
A put option (also known as a put option) is an option contract that gives the buyer the right to sell an asset, such as an ETF, for a specific amount in the future. If the asset is true in the future, you can choose to exercise the right granted to you by the option, first sell the asset at a low price in the market, and then sell it at the price specified in the option contract. The advantage of options is that it gives you only rights, but no obligations, even if you fail, you can choose not to exercise, but the option fee cannot be returned.
Let's say you think the CSI 300 Index will be ** due to certain market factors. Based on this expectation, you can choose to buy a put option on an ETF that tracks the index. This means that you pay a fee for an option in exchange for the right to sell the ETF in the future for a specific** (let's say $1,000).
If the index **Assuming that the ETF goes from $1,000** to $900, you can exercise your put option in the market for $900** ETF and sell the ETF at $1,000**, thereby achieving a profit of $100 per option (excluding option fees).
If the index is not**: Your put option may become worthless. In this case, your losses are limited to the option fee originally paid.
We hope you find the above information helpful.
Go short