How do you make money by short selling

Dear friends,
kindly explain me how does one make money by selling futures..
i understand that if the market looks bearish we short futures, but i am unable to get this concept...

1) if i sell futures do i have to buy them later.. what happens on expiry...

eg. if i short BHEL in november series CMP 230 and suppose the price goes to 200 by november expiry.. how i make money.. and since i have sold the futures do i have to buy them later...

your help will be appreciated.



Active Member
You can only sell when you have something to sell in the first place, so of course you have to buy back what you sold. If you buy cheaper than the diffrence is your profit, if the market goes up and you have to buy at higher price then you would be in loss. For example you sell nov series BHEL for 230 and later in the month buy it back at 200 then 30 rs per share is your profit. If you have to buy back at 260 then 30 rs per share is your loss. I hope the concept of shortselling is now clear to you.
thanks for explaining..

as you said you cannot sell what you dont have.. can you explain..

i was of the opinion that i execute a SELL (as there is a BUY ORDER AND SELL ORDER) trade order at the current rate.. (230) for nov expiry series...

Please explain.. me this i believe that i can directly execute a SELL Order from the platform...

as per your explanation i summarise follows...

now suppose on expiry date the price is 200 (I make profit of 30) but now since the date of expiry has arrived.. this is what i understand..

eg.. 30 (profit) x 250 (1 lot)= 7500 is what i add up to my profit

and 30 loss = 7500 is what i will be deducted from my margin...

is that correct understanding...

thanks again for your effort...
Dont get confused betwen SHort Selling Shares and Short selling in Futures
I believ in Indian market Short selling of Shares is not allowed ( in other markets it is allowed and you can do that by borrowing stock for short but kets forget that as it is not relevant to Indian market)

With futures it is a zero sum game hence it is like a balnce ( Taraju) for every buyer there is a seller and teh exchange just passes money from one side to other... at the end of trading day ( MArk to market)
Hence short selling is easy

Mr A says Nifty going UP
Mr B says it is going to go down
Both depost margin money with the echnage
One wins
So if you short a future you have to buy back before expiary..
dear global trader

thanks for the replies...i have a few doubts

please clarify ,
You said the i have to buy back before expiry...what if i dont buy it back..

I sell hcl tech- futures november series 630 and by end it comes down to 600 ahd i make a profit of 30.. but do i have to buy it back..or i can let the contract expire on last day...and pock the 30inr/share... pls explain this concept...

response from any fellow traders will be highly appreciated...

I AM NOT FAMILIAR WITH iNDIAN MARKET SO NOT SURE IF Stock futures are settled in cash or actual stock
If they are settled in equity then you wil get the stock

Similar threads