Question

please explain how you can make money short selling a stock.

Answer 1

Selling a Stock : An investor choose to sell the stock in the case if he think the price of the share are go down i. In This option we can first sell the stock and later recover the same from the market or purchase the same.

Example: Assume any stock is trading at $ 100 and we have confirm news that this stock will go down so first we can sell this stock at $ 100 and when it comes down assume the price of the stock is come down to $ 90.

Now, we can purchase this stock at $ 90, So overall trade is come our purchase price is $ 90 and selling price is comes to $ 100 and net gain = $ 100 - $ 90 = $ 10.

So,as above explained we can make profit by short selling a stock.