Simultaneous long and short in same stock

Discussion in 'Equities' started by mrwindmill, Feb 21, 2010.

  1. mrwindmill

    mrwindmill New Member

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    My question is simple-- Is it illegal to take long and short and short positions in the same stock at the same time?
    I am asking this because of the decision on the case regarding Shankar Sharma who was banned for (among other things, maybe) selling and buying the same stock at the same time.

    After all, isn't it very similar to a 'straddle' strategy in options? At times it is obvious there will be a big move, but can be either way. Whether one profits or not will depend on the stoploss, obviously.

    Now, my question is--
    1. Will a smalltime trader be barred for opening both long and short intra-day positions in an stock at the same time?
    2. Where are these laws/rules guiding trading defined?

    Regards, and sincere thanks for taking time to answer this.
     
  2. trader.trends

    trader.trends Well-Known Member

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    In a single account you can either be long or short not both in spot segment. FNO offers you the luxury to have a neutral position in many ways. Long in current month and short in next month contracts or like you mention straddle.

    In spot if you are long 100 shares, then if you short 150 shares, you will be net short 50 shares. One way to get around it if you want to do it intraday, is long in delivery and short in intraday and later convert one to the other depending on your outlook.
     
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  3. now

    now Member

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    if you are talking intraday , then if you buy 50 shares of reliance and then shorted 100 shares of reliance , than your account will show net 50 shares as minus , which is fine , as at point you were bullish on reliance and then you turned bearish intraday,
    if you are talking delivery , then if you are holding 50 shares of reliance in delievery and then you shorted 100 shares of reliance , so you are being on bearish on reliance for that day , you will buy back the shorted 100 shares by the close
    i have done both of the above things .
    I think the reason shankar sharma was banned beacause he was trying to manipulate the price by buying and selling at the same point .
     
  4. SCION

    SCION Member

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    Arbitrage.
    Attempting to profit by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. The ideal version is riskless arbitrage.
    you can be long in nifty and short mini nifty....you can go long in bse and short in nse for intraday or can use futures contracts in nse....


     
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  5. columbus

    columbus Well-Known Member

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    Yet another way.Go LONG in one month futures and SHORT in
    another month.
     
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  6. lokesh1212

    lokesh1212 New Member

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    Or can we use 2 different trading accounts to accomplish the same?

    Short in 1 account and long in another.
     
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  7. anuragmunjal

    anuragmunjal Well-Known Member

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    hi..
    Some big operators are banned becos they are suspected of circular trading. this is when u buy large quantities (generally of a thinly traded stock) frm one termial and simultaneously sell frm another. this creates fictitious volumes in that particular stock and in case the floating stock of that particular company is less and u have the promoter of that copany in the nexus, u can play around with the price too. this fictitious increase in price and volume is done 2 attract the interest of general public in that particular stock and this is a very old practice.
    as a retail investor , if u simultaneously buy and sell short the same stock, there are no laws against it. only ur net position is zero and u pay 2 way brokerage & other applicable charges.

    regards

    Anurag
     
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  8. mrwindmill

    mrwindmill New Member

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    Thanks everyone for answering.

    I guess anuragmunjal's answer is more or less on the lines of what I was expecting would be the case. It would be wonderful if someone can provide a link to some authoritative referenhce though.
    BTW, I have done this thing 2-3 times in the past and at least there was nothing in the broker's (ICICIDirect-marginplus) system to stop the transactions. Of course my volumes wouldn't have moved even an ant, let alone the prices on a national stock exchange.

    To trader.trends-- That is what should happen if such a law/rule was in place. Have you or someone else experienced it? That would clear things.

    The FAQ of ICICIDirect spells out many rules regarding what you can do with "same scrip" but I could not find anything on this topic. [LINK] http://content.icicidirect.com/indexfaq.asp#a82 [/LINK]
     
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  9. anuragmunjal

    anuragmunjal Well-Known Member

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    hi.
    If u r buying n selling in the same a/c, u r simply squaring off ur transaction,why would anybody have an issue with that.
    take another scenario, u hold an A/c with 2 different brokers, u buy with one broker and his server goes down, u sell it in another a/c with some different broker. at an oppertune time u square off both the transactions. I have done it 100s of times, there is no law which stops u frm doing this till the time ur intentions are not of doing 'circular trading' as mentioned in the previous post .
    or am I missing something here?
     
  10. columbus

    columbus Well-Known Member

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    Perhaps the best option would be BUYING two lots of Nifty (50*2)
    and SELLING five lots of Minifty (20*5) of same month.
     
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