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

Contribution plans-pension fund plans, Defined Contribution Plans In de...

Defined Contribution Plans In defined contribution plans, the contributions made by or on behalf of the employee are accumulated and paid on retirement along with such return a

Which ratios would a banker be most interested, Which ratios would a banker...

Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain. Bankers and other lenders use liq

Capital raising, how can covered bond affect other secutites price

how can covered bond affect other secutites price

Calculation of weighted average cost of capital, Calculation of weighted av...

Calculation of weighted average cost of capital (WACC) Market values Market value of equity = 5m × 4.50 = $22.5 million Market value of preference shares = 2.5m × .0762 =

Federal reserve system forecast, A. Joe wants to invest in Nebraska Municip...

A. Joe wants to invest in Nebraska Municipal 6% GOB that are rated AA. Joe's tax rate is usually between 28% .  GE plans to sell AA rated 8% coupon bonds. Compute Joe's after-tax i

Day traders, Day Traders Day traders are basically the market markers. ...

Day Traders Day traders are basically the market markers. They create liquidity in the market by frequently buying and selling stocks throughout the day in the hope that the pr

What are the functions of financial management, Functions of Financial Mana...

Functions of Financial Management Traditional function of financial management has been limiting the role of finance toraising and administrating of funds required by the compa

Credit policy, What is the Credit Policy? Describe please.

What is the Credit Policy? Describe please.

Illustrate the zero bonds security instruments, Illustrate the zero bonds s...

Illustrate the zero bonds security instruments. Zero coupon bonds are instruments under that a borrower promises, at the recent time, to pay one exact nominal sum (face value)

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