Short sell orders

Participants of a more speculative temperament may also engage in short selling. This type of transaction is permitted, within the prescribed limit, for all types of securities with the exception of options and leveraged index funds. Selling short means selling stocks that you do not own in your portfolio.

You will notice that there is no specific type of transaction for short selling since this is the case automatically when a sell order is placed for a number of units larger than the number of units held in the portfolio. This way of trading is possible because brokers can then lend the investor securities they have custody of.

In the financial markets, an investor makes a short sale when he wants to take advantage of a market he expects to be down. If the decline actually occurs, the investor may return the securities borrowed to the broker, buying them on the stock market at a price lower than the price earlier obtained in the short sale and, thereby, make a profit. The investor will incur a loss if the security's price rises after the short sale has been made.