Short Selling - Explained in Hindi - YouTube

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Namashkar, my name is Mukul and welcome to ASSET YOGI.

Friends due to Covid 19 lockdown, we didn't make videos for a while.

But now I will make videos from my home,

and corona related, because the economic slowdown is going down.

So related to that, I thought that a video should be prepared for you.

And which is a very important topic and there is a lot of confusion too.

People are not clear about its concept very well.

And what is this topic, I am talking about Short Selling.

What is Short Selling? See how normally people make money in the stock market.

Buy low sell high this is known to all.

You buy anything for cheap and sell it for expensive.

So the difference between that becomes your profit.

But if I tell you that, if anything is going down means its price is going down.

As the situation is going on today,

you can also make a profit from it.

Definitely, it is possible and this is what called Short Selling.

In a normal buying, the stock goes up, you buy when it was down.

First, you buy stock then sell, so the difference becomes your profit.

In short selling, it turns out to be the exact opposite.

You sell the stock first

and you'd think because that stock will go down, so you will sell first and then buy.

So your selling price is high and the buying price is low.

Because of this, you will be able to make a profit and that will be your short-selling profit.

So we will cover this concept in two parts.

In the first part, we will talk about the concept. In this video, I will talk about the whole concept.

How short-selling can be done in both the long term and short term?

In the second video, I will show you an actual live demo that how we actually can earn a real profit.

So you must watch both parts.

Let me tell you this concept again, it is not clear to people well, so you have to watch it carefully.

Let's start.

Friends, before starting the video, let me tell you that you must check out the MASTER INVESTOR series,

we have a playlist on Youtube.

Inside which we have explained all the concepts of the Stock in detail.

You will get the links below in the description.

Also, if you are new to the Stock market then where you should open your Demat account and Trading account,

you will also get its links in the description below for all recommendations.

So let's start the video quickly.

So now before explaining the concept of short selling, let me clarify that there may be a risk in it, so you must be very clear.

That any trigger, whenever you are thinking that the stock will go down

So you must know its trigger very well,

so what could be the trigger?

It can have two main reasons.

The first can be Macro-economic factors such as,

The financial crisis and subprime crisis came in 2008, overall the stock markets came down,

so the good stocks went down there too.

And in today's date that is in 2020, due to the corona situation, the world over the crisis has come,

and because of that, the stock market has gone down.

Too many,

stocks, even the nice stocks have got down.

So in such case, you get a trigger and if you feel that in any stock there will be too much

fall down so in that case, you can do short selling.

Secondly, there may be a problem in an individual stock,

maybe some of its earnings are down reports,

maybe negative news has come, for eg. in the past for the last 2-3 years the problem of NPA's was going on in the bank,

the problem of the non-performing asset was going on.

Similarly, there may be problems in different sectors or inside a particular stock.And if any

negative news comes for eg. within a particular day, you can also do short selling on that day.

So here's your analysis and a little bit of luck both works.

Anyway, inside the stock market, there is always a factor of a little luck.

Let's go straight to our blackboard to understand the concept.

First of all, let us understand normal buying. And how money is made in normal buying?

Here suppose one is the buyer and one is the seller.

Here the buyer will give the money to the seller and the seller will transfer shares to the buyer.

Shares will come from the seller's Demat account to the buyer's Demat account.

And how profit and loss will be here,

suppose a share

is of Rs 350

and let's say after 3 months.

Here, let us understand how profit and loss will be calculated.

First of all here at Rs 350,

need to buy, the buyer

will buy this share at Rs 350. I will consider today's date as zero date.

and let's say after 3 months the share is of Rs 400, so if he sells at Rs 400,

so the profit of the buyer of Rs 50 will be made after 3 months.

And let's say if the market goes opposite, doesn't go according to buyer and

goes down Rs 50 and reaches to Rs 300, so after 3 months it will sell

then there will be loss for the buyer worth Rs 50.

So this concept is very clear and we understands the normal buying.

In short selling, it turns out to be the exact opposite, right now I am talking about a long term, intraday i.e.

I am not talking about the trading that happens in a single day, talking about a long time.

We assume this period of 3 months,

similarly this period can be longer.

So see in short selling, understand what happens,

at Rs 350 if the seller,

(right now we are talking about the seller here)

if the seller thinks; if any man thinks that

stock will go down in the upcoming time, after 3 months this stock should go down, if he sees any crisis,

so what he will do, he wants to sell these stocks for Rs 350.

And if the price that he was thinking of Rs 300 comes after 3 months, then definitely he will get a profit of Rs 50 over there.

And he will buy that stock after 3 months.

Now see it becomes a very simple situation if I am talking about the stocks that are already present in the seller's Demat account,

then this selling becomes very easy.

But he wants to bet, any guy doesn't have stocks, still, he wants to do betting.

So how can he do that?

So we call it short seller, the guy who doesn't have

those shares is called short seller.

So if here the bet of the short seller is right, then his benefit will be Rs 50.

From Rs 350 because it came down to Rs 300. As he sold at Rs 350,

and bought it for Rs 300 so the difference is Rs 50 and it becomes his profit.

How would this be practically possible? We will understand soon.

Now the short seller here doesn't have shares so from where he will bring those shares?

Now the buyer definitely wants these shares because these shares have to be delivered to the buyer after 3 days.

So from where he will bring those shares? There is a concept for this that is called Security lending and borrowing.

Here is a lender, who has some shares already in his Demat account.

He can lend it. So he will borrow it from the lender,

shares will get from the lender and these shares will reach the buyer.

This work has to be done before 3 days.

And here is the lender,

he gets an interest.

This,

SLB's concept that I am telling you is operated through SLB's account, which we say Security lending borrowing account.

And this facility is available with a lot of brokers.

We will see a live demo of Zerodha in the second part of the video.

So inside the Zerodha, you can also open the SLB account.

But still, let me tell you that the SLB facility is not used much in India.

Inside it, you have to assume that there is low liquidity. So what will happen here, the lender will lend his shares for the 3 months.

And in return, he will say that for 3 months you will pay Rs 10 per share as an interest.

let's say, he wants Rs 10 per share as an interest.

And I don't know you have loss or benefit.

As if you lend borrow from the bank, here you are borrowing the shares from the lender.

So I hope you are clear with this concept that here borrowing of the shares takes place actually.

Now let's assume that the market, the stock goes in the opposite direction.

According to it, it doesn't go according to the short seller and the stock reaches Rs 400.

After 3 months,

as his 3 months period is over so he has to return the stocks to the lender.

So he has to buy it for Rs 400.

Here, he will buy after 3 months at Rs 400. And Rs 50 becomes his loss.

So in short selling, it may be profit or loss.

Now let's understand the situation after 3 months.

After 3 months, what will happen?

Now because this short-seller has to again buy the shares and return to the lender so one more seller comes into the picture.

From whom he buys the shares, will obviously return it according to Rs 400.

Either according to Rs 400 or Rs 300. If the market has gone down then it will be Rs 300,

according to it he will purchase.

If the rate is Rs 400 then he will purchase according to it.

Once the buyer gets the stocks then he will return them to the lender after 3 months. Along with,

he also had to return back the Rs 10 interest as promised after 3 months.

And now let's see how would be net profit?

there was a profit of Rs 50 for the short seller if the market goes to Rs 300.

Along with Rs 10, which has to be given to the lender, that interest should be subtracted here.

So his profit becomes around Rs 40 per stock.

And if the market goes opposite, not goes according to his expectation,

so if the stock goes to Rs 400, in that case, he will suffer from net loss.

Loss of Rs 50 was from here directly because of the price difference,

and he has to give Rs 10 to the lender, so now the total loss will be Rs 60.

So see the profit here is of Rs 40 only, but the loss will be of Rs 60. For this reason, there is more risk.

Secondly,

the direction of the market here is, you should understand this.

That the direction of going down is mostly less, such chances are less.

You may find these occasions once in 2 years or 3 years.

Or else if you get negative news within a stock on the regular basis, then you will find these occasions.

But the chances of going up is always more. So the probability of making a profit when the market goes up is always high.

The probability of making a profit in short-selling is low.

So that's why I am telling you again, that when you have a clear trigger

When you feel actually that the stock market is going down or the chances of going down for a particular stock is high,

then only you should do short-selling.

So we understood the operation of short-selling in the longer-term i.e 3 months or the time more than 1 day.

Now we will talk about Intraday,

if you want to trade within a single day so how does short selling occur?

Intraday is a little bit popular,

because liquidity is very high in intraday, that's why you can do short-selling quite easily. There is no problem with it.

The SLB account's market, the long term market of short-selling is not very much developed in India.

So now we'll talk about the Intraday.

Suppose he is the buyer and another one is a short-seller.

And,

short seller thinks that in today's date, in the morning now see here you must understand the timeline rightly,

that on 9:15 AM market opens. And the maximum time we have is up to 3:30 pm when the market opens ,

so you only have a time of single day.

So here, the short seller thinks that price will go down from Rs 350,

he thinks that the price will go down to Rs 340 so he can make a profit of Rs 10.

Now before 3:30 pm whenever;

it hits the trigger of Rs 340, it hit his target.

So he will book his gain i.e. his profit. So here what will short-seller do,

So firstly, at the rate of Rs 350, he will sell the shares.

And let's say the market goes according to him and the rate of Rs 350 reaches, near about 2:00 pm.

So here he will buy back them; if he buys back then he will make a profit of Rs 10.

But nowhere comes the issue since he doesn't have these shares so, from where he will bring these shares?

We have seen in the long term that there is lending, you have to borrow the shares.

But in short term,

you don't have to deliver, you will have the trade on the same day.

So what you will do? You will execute one more buying trade, you will buy those shares on the same day.

So here one more seller comes into the picture. You can buy shares from any of the sellers.

You will give money to him. How much money you will give? Here the rate is Rs 340. Let's say,

you bought it for Rs 340 from this seller.

This buyer whom he sold, let's say for Rs 350 he sold. So obviously he gets profited by Rs 10.

But in Intraday also, opposite can also happen, Maybe the market goes opposite and maybe the market,

reaches Rs 360, which means the stock price reaches Rs 360.

So in such a case, he has to buy it for Rs 360.

And there will be a loss of Rs 10.

Now here we will understand one or two concepts more.

Suppose he doesn't buy,

suppose his loss is going on.

He feels that he will wait till the market is not closed.

What happens in such a case the broker doesn't wait for you. Generally,

3:15 pm or 3:20 pm is the time for the different brokers when they auto square-off,

as many open positions are there.

If you have taken a selling position the obviously its exit would be square-off of buying.

And if you have any buy position, then your shares will be sold off,

if you trade in the Intraday.

So I am taking eg. of Zerodha that is at 3:20 pm. At 3:20 pm automatic square off takes place.

If the market is going upwards and you don't buy back the shares,

So, your broker will automatically square off and buy back those shares at whatever price the market is going on.

So let's say, the market rate was Rs 360 then obviously you will make a loss of Rs 10.

So now the second question arises that is there any way to limit this loss?

Because now see the share price can increase as much in one day, as there is no limit on that.

Now if we want to limit our losses, let's say,

we think that we will not go above Rs 355. We can't bear a loss of more than Rs 5.

So we call that concept STOP LOSS.

Let's say if the price Rs 355,

hits at 12 noon.

Then automatically your share will be bought if you have put a Stop Loss.

As soon as it hits stop loss, you will be in Rs 5 loss.

And profit that was meant for you, obviously it won't be possible anymore.

And if you want to trade once again after 12 noon, then you can.

Now we have understood the concept of short selling, here we have to understand one more concept.

Maybe this question has come into your mind also

If you have not Square off your position till 3:20 pm. And maybe,

if the broker also doesn't get time for square off.

Let's say it's 3:30 pm.

So now what will happen?

So now,

if you can't buy those shares then obviously the buyer to whom you sold those shares,

(since you don't have those shares) so the buyer who purchased those shares, will not get the delivery,

in such cases, SEBI can impose a penalty on you.

But there are chances to avoid that penalty too.

Because between 3:30 pm - 4:00 pm,

stocks go to auction because brokers market is live between 3:00 to 4:00 pm.

The broker tries to close those open positions in half an hour.

So if from 3:20 pm to 3:30 pm it doesn't auto square off, then also brokers have time from 3:30 to 4 o'clock.

If they close the position then obviously the rates here will be different as the shares are auctioned here.

If they find those shares then at whatever prices the broker will quote, you have to buy at that quoted price.

And if you don't buy them, as I said before, SEBI will impose a penalty on you.

That's why if you plan short-selling, then take care of your broker's deadline, when the auto square off takes place.

Before that, you have to buy those shares.

So I hope you liked this video. You must watch part 2 of this. I will show you the live demo of short selling, how to do it.

We will use the platform of Zerodha.

If you liked this video then please like and share this video with your friends and family.

Maybe they too have a lot of confusion about short selling.

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