The trading market consists of equities market without owing any shares of stock. The short selling Zerodha involves borrowing stock that is not owned by you and involves buying those stocks when the price drops.
However, thinking in the way actually does not offer much profit, but the concept is being operative in the trading world.
Short Selling in Zerodha
Likewise, with other brokers, the short selling in Zerodha is quite risky. To execute the short selling Zerodha set up the margin account.
In simple terms, short selling in Zerodha is selling stocks that are not in your Demat account and buying them again when the price goes down. The profit made by you is equal to the difference in the value between the two prices.
Zerodha Short Selling Margin
The margin account is established with the minimum equity commitment equal to the amount set by Zerodha.
After the minimum amount is set, make sure that the short stock have 100% of short sale plus 50% short sale value in the margin account.
Let’s consider an example.
If you are willing to sell a short 100 shares of a stock XYZ at Rs 20 each then there should be Rs 2000 plus an additional Rs 1000 in the margin account.
Short Selling Zerodha in Kite
Short selling in Zerodha is profitable only when the closing price is less than the entry price. Prices going down the shorted value, the investor faces a loss.
Considering the stop loss, it is always higher than the price that has be shorted.
When you want to process short selling in Zerodha, you can do so with the Zerodha Kite.
Log in to the app and select the stock whose price you want to short, then click on sell. After the price of the stock goes down, exit the position thus buy the stock back.
Here it is important to know that unlike the futures market in which the position is carried forward the short-selling only works on an intraday basis in the spot market thus the short position is not carried overnight in the spot market.
The stock market allow the investor to sell a stock without owning it. This can be done by short selling in the cash market.
But the short-selling can be done only with intraday trading. Thus if you sell a stock in the morning than you are required to buy it by the end of the day or say before the market close.
If you do not buy the short sell stock by the evening, then it will get into the T+2 rolling settlement in which you need to deliver the sold stock after two days. This is the important point that one must keep in mind while involving in short selling.
Short selling is one of the investing technique that is being opted by many experienced investors having good market skills and strong risk tolerance.
However, it is associated with limitless losses and the least profit.
Invest smartly and get into it by using the right strategies and plans.
Enter Your details here and we will arrange a FREE Call back.
More On Zerodha
In case you are looking to know more about this discount broker, here are some reference articles for you: