Table of Contents
Chapter 1: Introduction to Short Selling Stocks
Chapter 2: Short Selling Terminology
Chapter 3: Short Selling Limitations and Risks
Chapter 4: Who Should Get Involved in Short Selling
Chapter 5: Factors to Consider before Short Selling
Navigate This Page
Chapter 4: Who Should Get Involved in Short Selling
– Speculating
– Hedging
Chapter 4: Who Should Get Involved in Short Selling
Short selling is an investment strategy used by those who have a good understanding of how stock prices move and which factors influence that movement. Here are some applications of short selling:
Speculating: Speculators willing to take considerable risks in return for the chance of making huge gains use short selling as an investment strategy. These investors track the markets closely, study industries and companies so that they are fully aware of the prospects of a stock. Short selling is not for those who want to build a safe portfolio for an important expense or for those who cannot afford big losses. A speculator with sufficient experience in the markets knows when to open and close his position to make profits from short sales.
Hedging: Those investors who want to protect or insulate their investments also resort to short selling. The investment can be hedged against a fall in prices by a short sale. You need to have a good understanding of the short sale process and the risks involved before it can be used to hedge long term investments.
Day Trading – Day traders often use naked short selling to make profits from daily price movements. A day trader must have good judgment in selecting the right stocks and he should be able to make quick decisions.
Next Chapter: Factors to Consider before Short Selling