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What is naked short selling?

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The stock market is a huge place and it is continually growing. There are thousands of companies that are a part of the stock market and thousands more people who invest in those companies. Some people do very well in the stock market and some people do not do so well. Those people who do well are the people who have come up with strategies and techniques to help them invest wisely. These strategies and techniques tell them when to buy stocks, when to sell stocks, etc.

There are many investing techniques that are well known in the investing worlds. Techniques such as asset allocation. Things that people use in order to get a high return while reducing the risk of investing in the stock market. The people who tend to do best in the stock market are those who are not afraid to take risks. They may lose money at first but over time they will become experienced and learn strategies so that they do not lose as much money in the stock market. They eventually get better at analyzing stocks and determining which risks are safe to take and which are not.

One thing that some investors do is short selling. Short selling is when a person sells stocks high and buys them low with the hopes that they will make a profit. The stocks that they sell are not stocks that they actually own; they are borrowed stocks. A short seller will buy stocks from a broker and sell the while the prices are high. They are anticipating that the prices will drop. If the prices drop they will be able to buy back the shares at a lower price and keep the difference. If the prices go up they will have to buy the shares back and pay the broker the difference. It is risky but for those who do well at analyzing stocks and can usually tell when a stock is going to go down, they could make good money off it.

One thing that some people do that is can be illegal is naked short selling. Naked short selling is bad because you short sell without borrowing stocks and without trying to borrow stocks. You sell the stocks but you do not really have them. This is not good and it can hurt the market. There are people out there who still do it because they say that they are not hurting the market they are helping it. The numbers of those who naked short sell are not very extensive.

There are many people who fight against naked short selling as wrong and many people who fight for it as not wrong. Those who think it is wrong fight that it hurts the market and drives prices down. They say that it is taking the investors money without giving them the product. Others would argue that the investment goes through and that the product is purchased.

There is much controversy over naked short selling. A person who was considering naked short selling would do better to just short sell. If you really think that a stock price is going to drop, get in contact with a broker and borrow stock that you can sell. Maybe naked short sellers want to avoid losing money by not actually borrowing it. This would be as silly reason to naked short sell. The only way that you could really get good at short selling would be to try it out and fail a few times. The more you fail the more you will learn from your mistakes and get better at it. Eventually you would be able to analyze stocks better and you would not have to worry about losses when short selling.


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