Short Selling

Short selling is selling the shares that you do not own. The broker lends the shares and holds the investment as collateral. In short selling, you have to subsequently square off or close the short by buying back the shares from the market and returning the same to the broker. Interest costs are charged for the loan of shares. If a trader expects that the price of the shares of a company will come down in the future, he is likely to sell the shares at current levels and buy when the price declines, earning a profit.

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