Need information on how to short stocks

#1
Hello Im new to this. I need some information.

I was going through various sites on this subject. Still Im a bit unclear on a few things.

As i understand it, in order to short sell a given stock you need a margin account. Is that true?

Is it possible to short sell stocks with a kotak gateway account?

Thanks in advance for any help :)
 
#2
Hello Im new to this. I need some information.

I was going through various sites on this subject. Still Im a bit unclear on a few things.

As i understand it, in order to short sell a given stock you need a margin account. Is that true?

Is it possible to short sell stocks with a kotak gateway account?

Thanks in advance for any help :)
I am new to the Indian markets but as far as I know, you cannot short sell in the cash segment of the equity markets. If you want to short sell you can only do so using futures.

See http://content.icicidirect.com/learning/futures/learnhome.htm
 

newbie_7

Active Member
#3
allow me to correct you...you can short sell in the cash market but you have to square off before market close on the same day. if you dont you can transfer the same number of shares from another demat account and return the shares you have shorted. you cannot settle in cash. failure to transfer the shares from another account (eg if you dont have any) will result in the shares you shorted being auctioned on opening bell on the third day. a penalty may also be levied by the exchange and you have absolutely no say in the matter.

in the futures market, you have to buy or sell a minimum lot by paying a margin (differs with every stock and everyday depending on market conditions and volatality). if the trade goes in your favour, fine. if it doesnt, you have to maintain the minimum margin at all times. the broker may remind you (not mandatory -its your job to check daily) of your margin commitment if a trade goes against you (technically called a "margin call" ).

if you have faith in your decision, you can hold both long and short positions till expiry ie. the last thursday of every month. you have the option to square off at any time after entering the trade. you also have the option to roll over to the next series but the cost of carry is usually high and most traders avoid it if they can.

remember that in the futures market you dont own the shares. you just borrow the shares and enter into a contract to buy or sell (whichever applicable) at a later date (before expiry of the contract).

last but not the least...it is best to trade futures when a trend is confirmed either way. the year 2008 was great for shorting in the futures market. given market trends in the last few days that appear to be uncertain and undecided, i would stay away from the futures market for now.

i hope this helps you
 
#4
Thanks for the interest AnandK.

Thanks a lot newbie. Really informative post :).

Another question newbie.
Usually
If one is doing a short sale intra day trade, do they have the option of specifying the price at which a given position will be squared off ? (I mean like a limit order?)
 

newbie_7

Active Member
#5
hi...

yes...you can but prices can move at a fast pace and you need to monitor continiously and modify your limit price if necessary. i use sharekhan and i cannot comment on other trading platforms.

one more thing i forgot to mention is that in the futures market, your broker reserves the right to square off your trade without even asking you if you do not maintain your margin or honour your margin call.

thank you,
trade wisely, trade well (a sharekhan quote, not mine) :)
 
#6
hi...

yes...you can but prices can move at a fast pace and you need to monitor continiously and modify your limit price if necessary. i use sharekhan and i cannot comment on other trading platforms.

one more thing i forgot to mention is that in the futures market, your broker reserves the right to square off your trade without even asking you if you do not maintain your margin or honour your margin call.

thank you,
trade wisely, trade well (a sharekhan quote, not mine) :)
Ok. Thanks again. :)
 
#7
Hadn't Exchanges issued Stock Lending & Borrowing Programs, what happened to them....I thought that one could short the stocks in cash segment by borrowing them under the SLB mechanism. Don't know the procedure though...anybody?
 

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