Short selling

Hi fellow traders,

Recently, I came to know about a powerful tool SHORT-SELLING. I've some doubts pertaining to it.

1)What happens if I short sell a stock and fail to buy it back the same day?

2)Can I carry forward it and buy it back at a lower price the next day?

3)Or will there be any penalty imposed if I don't square it off the same day?

4)Or will I've to forego the short-sell amount?

5)Is there any time limit for squaring it off?

Plz do revert back to me with resolution.

Help appreciated.

Sangfroid22

1)What happens if I short sell a stock and fail to buy it back the same day?
You have to square up the deal the same deal or else it goes for auction.

Can I carry forward it and buy it back at a lower price the next day?
No

Or will there be any penalty imposed if I don't square it off the same day?
Yes, limited to 20% I am told.

Will I've to forego the short-sell amount?
No, it is credited to your account as soon as you have short sold.

Is there any time limit for squaring it off?
Same day as you short sold.

If you hold some stocks of the shares of the same company in your DP account the exchange will adjust against this first.
e.g. Lets say you short sold 200 shares of TCS on 9th July, and didnot square off by end of the day. Also lets say you hold 150 shares of TCS in your DP account; these 150 shares will be first adjusted. The exchange will auction 50 shares on T+2 day at close, i.e 11th July 3.30 pm at a price equal or above that day's closing price. If the price had fallen in these 2 days you are lucky. If it had shot up you pay lots more.

A good idea is to buy 50 shares the very next morning on 10TH JULY,closer to the price you wanted to buy. If the price goes by 15% before auction these shares will also rise in price and help offset the extra amount. What you end up losing is only the penalty.

VPS

Cash Market, Equity Market:
1. The shares will go to auction on 3rd day and 5th day you'll pay the price.
2. No, in Cash segment you can't carryforwards shorts. (there may be Securities lending and borrowing which is a costly affair)
3. Penalty - will be market price buying of the shorted shares on auction day or 15% of the shorted price.
4. you'll be refunded the remaining profit/loss after auction.
5. yes, 3:30pm is the deadline or you are dead

Futures market/ Derivatives market:
1. Nothing, you can carry the position till the last thursday of the month.
2. Yes, till last thursday of the month.
3. No penalty
4. No
5. Last thursday of the month. eg. 31July2008

You should short in futures but in futures, you are required to use a lot of specified shares. see the derivatives section.

oh excelent , i had some doubts about the same (shorting) in the cash segment and was about to open a thread .. thnx rizwan

Dear friends,

I had done short sell of 1000 shares of Some SCRIP with margin on friday and could not square off at the end of the day since the share reached its upper limit and trading was suspended for the day.I have been told by my broker that these shares will now be auctioned by Exchange and profit/loss shall be determined on the day of auction which i have been told is on the 5th day from the day of short selling of shares.

These shares should have been automatically squared of by the broker.but now i have to pay a price if the share prices go up during the next 5 days.


Since Mr PAKatil replied earlier in a below mentioned post link that buying can be done next day and shares go to auction only the 3rd day.but my broker is advicing me other wise. Please advice if i can buy the shares on monday and if there is any SEBI article or circular indicating the same then i can pursue this with my broker.

Please advice........

http://www.traderji.com/investors-grieviences/17277-intraday-shortage-penalty.html#post315434