Short sales, Financial Management

Short sales  :

Short sales of a security means borrowing of an underlying security by an investor from other investors who are holding it (in Demat account) and selling it with the understanding that at some point in future the prices of security will move down. During that period the short seller will buy the security and return it to genuine holder, thereby "covering" the short and gaining from the declined prices of security. The investors or short-term traders perform this activity based on some price sensitive information regarding security or sector, or based on personal knowledge regarding movement of security and belief that the security's value will decline in future. In the hope of earning profits he sells on high to buy on low later based on analyzed lower price the security will reach. Hedge Funds and Foreign Institutional Investors (FIIs) are leaders in employing such kind of trading activities to gain from short-term movement of the security prices. Though derivative instruments are available for short selling without holding or borrowing from others, they should be existing in the market for the underlying security in which the short seller is interested.

The trades of all the members in all the securities in Compulsory Rolling Settlement (CRS) are now settled by payment of money and delivery of securities on T + n basis. All deliveries of securities are required to be routed through the Clearing House, except for certain off-market transactions which although required to be reported to the Exchange, may be settled directly between the members concerned.

 

Posted Date: 9/10/2012 6:16:33 AM | Location : United States







Related Discussions:- Short sales, Assignment Help, Ask Question on Short sales, Get Answer, Expert's Help, Short sales Discussions

Write discussion on Short sales
Your posts are moderated
Related Questions
The process of valuing a callable bond is similar to that of an option-free bond, except for one thing - when the call option may be exercised b

Determine about the call and put option A call/ put option provision allow both issuing company and investor to redeem the bonds at a specified amount before maturity date. Lon

Aims of FSA The aim of FSA is to promote efficient, orderly and fair markets, and to help retail consumers to get a fair deal. In fact, FSA has set out its aims under three bro

There are two ways to estimate yield volatility - historical volatility and implied volatility. Thus far we have discussed how to calculate volatility by estimati

The wide gap between maturities poses problems in using the on-the-run issues, especially after five years. Some dealers and vendors use selected off-the-run Trea

Question: PART A With the view to modernise its accounting system Government is considering adopting International Public Sector Accounting Standards (IPSAS) so as to maxim

Q. Show the Advantages of IRR Method? Advantages of IRR Method:- (i) Similar to the other DCF methods IRR methods as well take into consideration the time value of money.

QUESTION 1 [25 marks] Xelo Ltd, whose current sales consist of fixed operating costs of R140 000 and variable operating costs equal to 22% of sales, has made the following two sale

What is Cost of Capital Cost of Capital is the rate which should be earned in order to satisfy required rate of return of the firm's investors. It may also be defined as the ra

The United States has experienced continuous current account deficits as the early 1980s. What do you think are the major causes for the deficits? What would be the results of cont