Sample of how it works. Profitable trade Shares

Sample of how it works.

Profitable trade

Shares in C & Company currently trade at $10 per share .

1. A short seller borrows 100 shares of C & Company and immediately sells them for a total of $1,000.


2. Subsequently, the price of the shares falls to $8 per share.


3. Short seller now buys 100 shares of C & Company for $800.


4. Short seller returns the shares to the lender, who must accept the return of the same number of shares as was lent despite the fact that the market value of the shares has decreased.


5. Short seller retains as profit the $200 difference (minus borrowing fees) between the price at which he sold the shares he borrowed and the lower price at which he was able to purchase the shares he returned.