Short sales, Financial Management

Assignment Help:

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.

 


Related Discussions:- Short sales

Convertible bonds, The issuer offers bonds with an option to the investor t...

The issuer offers bonds with an option to the investor to convert these bonds into equity shares at a pre-fixed ratio. These can be fully convertible bonds or partly co

Management of sundry debtors, Management of Sundry Debtors: SUNDRY - M...

Management of Sundry Debtors: SUNDRY - Miscellaneous infrequent or small customers that are not given individual ledger accounts but are classified as a group. SUNDRY CREDI

Benefit and drawback of maintaining many manufacturing sites, Discuss the b...

Discuss the benefits and drawbacks of maintaining multiple manufacturing sites like a hedge against exchange rate exposure. Answer:  To set up multiple manufacturing sites can

Explain about centralised treasury function, Q. Explain about Centralised t...

Q. Explain about Centralised treasury function? Treasury departments are usually a feature of larger companies than Frantic although it is perhaps beneficial to consider the be

Factors considered in assigning a credit rating, Credit rating agenci...

Credit rating agencies carry out credit rating. Companies appoint these agencies to assign credit rating for their corporate issues. The rating agencies may condu

Determine the basic requirements for a successful jit, What are the basic r...

What are the basic requirements for a successful JIT inventory control system? For a JIT system to be booming the supplier must be willing and capable to deliver materials instan

Calculation of cost of capital, Q. Calculation of Cost of Capital? Calc...

Q. Calculation of Cost of Capital? Calculation of Cost of Capital: - Calculation of cost of capital includes: (A) Calculation of cost of specific sources of finance (B) C

Objective of working capital management, What is the Objectives of Working ...

What is the Objectives of Working Capital Management? Describe please.

Find out weighted average cost of capital, The Beta Corporation has an opti...

The Beta Corporation has an optimal debt ratio of 40%. Its cost of equity capital is 12% and its before-tax borrowing rate is 8%.  Given a marginal tax rate of 35%, calculate (

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd