We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- Shorting requires us to sell first and buy later.
- The short trade is profitable only when the closing price is lower than the entry price.
- There would be a loss when the price goes higher than the price at which one has shorted.
- The stop loss in a short trade is always higher than the price at which one has shorted.
- One can only short on an intraday basis in the spot market.
- The short positions cannot be carried overnight in the spot market.
- The short position in the futures market can be carried forward overnight.
- The margins requirement for both short and long trades are similar.
- The M2M computation is also similar for both short and long trades.