I think this threads needs some input on basic concepts.
For anyone to do Trading, you have to manage two aspects: Buying and Selling. Trade completely realizes his profit only when both the Buying and Selling are fully completed.
This understanding of trading is universal and applicable to every aspect of trading and for every trader. It is as applicable to milkman/newspaperman as it is to arm dealers selling arms and ammunitions to a nation.
For a trader to make profit, he has to Sell at a price higher than the price at which he buys it. Therefore, some traders buy in X country and sell in Y country and go through all the hassles of moving goods from place X to place Y.
Closely associated with "buying" and "selling" as its vital step, there is concept of "delivery". When a trader is buying, he has to accept delivery of goods and when he is selling, he has to give delivery of goods.
Idea of "Short Selling" completely relies on this vital step of delivery. Any trading activity in any market can involve "short sell" as long as the selling trader has been granted time to make delivery.
If delivery is to be made instantly, short-selling is not possible.
When we purchase a flat in under construction building, the builder is short-selling us a flat. He doesn't have the flat that he is selling to us because we are OK with his proposal to accept delivery after some time.
When your milkman takes money for entire month in advance, he is short-selling you milk for entire month. It is possible because you are OK with staggered delivery cycles for products such as milk.
In Future&Options segment of a Stock Market, a trader is allowed time till end of contract (a very specific date and time, 3:30 PM of last thursday of every month) to make delivery. Hence, it is possible for trader to short-sell for months.
In Cash segment of a Stock Market, a trader is allowed time only until 3:30 PM of the same trading day to deliver the goods he is selling. Failure to delivery by this time will result in penalties and fines.
If I want to short sell in cash market, I can sell at anytime between 9:15 AM and 3:30 PM as long as I can buy the deficit before 3:30 PM.
For anyone to do Trading, you have to manage two aspects: Buying and Selling. Trade completely realizes his profit only when both the Buying and Selling are fully completed.
This understanding of trading is universal and applicable to every aspect of trading and for every trader. It is as applicable to milkman/newspaperman as it is to arm dealers selling arms and ammunitions to a nation.
For a trader to make profit, he has to Sell at a price higher than the price at which he buys it. Therefore, some traders buy in X country and sell in Y country and go through all the hassles of moving goods from place X to place Y.
Closely associated with "buying" and "selling" as its vital step, there is concept of "delivery". When a trader is buying, he has to accept delivery of goods and when he is selling, he has to give delivery of goods.
Idea of "Short Selling" completely relies on this vital step of delivery. Any trading activity in any market can involve "short sell" as long as the selling trader has been granted time to make delivery.
If delivery is to be made instantly, short-selling is not possible.
When we purchase a flat in under construction building, the builder is short-selling us a flat. He doesn't have the flat that he is selling to us because we are OK with his proposal to accept delivery after some time.
When your milkman takes money for entire month in advance, he is short-selling you milk for entire month. It is possible because you are OK with staggered delivery cycles for products such as milk.
In Future&Options segment of a Stock Market, a trader is allowed time till end of contract (a very specific date and time, 3:30 PM of last thursday of every month) to make delivery. Hence, it is possible for trader to short-sell for months.
In Cash segment of a Stock Market, a trader is allowed time only until 3:30 PM of the same trading day to deliver the goods he is selling. Failure to delivery by this time will result in penalties and fines.
If I want to short sell in cash market, I can sell at anytime between 9:15 AM and 3:30 PM as long as I can buy the deficit before 3:30 PM.
and according to me that is why we always see profits