![]() Example of Short SellingĪssume a trader believes that a stock, say XYZ, currently trading at Rs 500, will fall in price in the next month or so.The trader borrows 100 shares of XYZ and sells them to another investor. Besides speculation, investors and fund managers also use short selling to hedge the downside risk of holding a long position on securities or any related ones. However, if such a prediction for price declination does not materialise and share prices move upward instead, the concerned trader stands to lose. If prices do drop, traders make a profit from the difference between the selling price and the purchasing price. To close such a position, traders must eventually buy back the stocks they sold short. They sell it at the prevailing market rate, thus shorting the position and waiting for prices to drop. To short stocks, traders tend to sell shares that they do not actually own but are instead borrowed from a broker-dealer, thus opening a position for trade. Investors who short-sell stocks expect share prices to drop at some future date and aim to capitalise on this prediction to fetch some profits. Simply put, short selling is an investment strategy with the motive of " buying low and selling high" to cash in some gains. It has accused the Adani Group of accounting frauds, stock manipulations, and money laundering.īut before we go ahead with what this research report mentions and how it is hurting Adani Group, let us first understand what short selling is and why it is done. Hindenburg mentioned that based on its research, it has taken a short position in Adani Group Companies through U.S.-traded bonds and non-Indian-traded derivative instruments. Since then, not only has the billionaire lost his position as the world’s third richest person, but even his group’s shares are bleeding heavily. ![]() (1/x)- Hindenburg Research January 25, 2023
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