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Short sale: Difference between revisions
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{{ | {{aai|gmsla|{{layman|Short selling}} | ||
[[File:PB stock loans.png|450px|frameless|center]] | [[File:PB stock loans.png|450px|frameless|center]] | ||
}}The practice of selling a security you don’t own in the first place, meaning you have negatively [[correlation|correlated]] [[exposure]] to the price of the security. To do this you will need to [[borrow]] the stock under a [[stock loan]], and the agreement you will want for that, if you’re in the English speaking world outside America, will be the {{gmsla}}. Note though that the stock loan isn’t the thing that makes you short, but your sale of the security you’ve just borrowed. Seeing as you have to return it, and you don’t have it, you will have to buy it. Obviously this works best for you if the stock declines in price in the mean time. That’s the point of your trade, see? During that period, you are paying the financing cost of that stock under your stock-loan. | }}The practice of selling a security you don’t own in the first place, meaning you have negatively [[correlation|correlated]] [[exposure]] to the price of the security. To do this you will need to [[borrow]] the stock under a [[stock loan]], and the agreement you will want for that, if you’re in the English speaking world outside America, will be the {{gmsla}}. Note though that the stock loan isn’t the thing that makes you short, but your sale of the security you’ve just borrowed. Seeing as you have to return it, and you don’t have it, you will have to buy it. Obviously this works best for you if the stock declines in price in the mean time. That’s the point of your trade, see? During that period, you are paying the financing cost of that stock under your stock-loan. | ||