Knowledge Base: |
Understanding sell short and buy to cover orders |
Source: https://us.etrade.com/e/t/estation/contexthelp?id=201010700
The traditional way of making money on a stock is to buy low and sell high. When you sell short, you do just the opposite with this strategy. You first sell shares you don't already own (which you borrow from your broker), and then you buy them back later (hopefully at a lower price). There are certain risks when you sell short, and it is important to know what they are before you place this kind of trade.
There are some rules involved with this; for example, your broker must have the shares you want to borrow. In addition, you might not be able to sell the shares short while the price is going down (i.e. the stock's price has to be neutral or going up, if subject to what's called up tick or zero plus tick.
You must have a margin account in order to place short sales. When you use margin, you are borrowing money from E*TRADE Securities LLC based on the value of the cash and securities you currently have in your account. You're charged interest on the amount you borrow; and the holdings in your account act as collateral to secure the loan. You can hold the shares short as long as you meet the margin requirements for the position, and E*TRADE Securities LLC is able to continue to borrow the shares.
When you are conducting these types of transactions, you will need to enter a "sell short" order to "open" the position, and a "buy to cover" (not a regular buy) to "close" the position. The buy to cover effectively returns the borrowed shares to your broker.
The time it takes for your order to execute depends on a number of factors including the market activity, the price settings, and term limits you set.
For step-by-step instructions on how to place a trade, see "place a stock order"
For general information on investing in stocks, see "Invest in Stocks"
The traditional way of making money on a stock is to buy low and sell high. When you sell short, you do just the opposite with this strategy. You first sell shares you don't already own (which you borrow from your broker), and then you buy them back later (hopefully at a lower price). There are certain risks when you sell short, and it is important to know what they are before you place this kind of trade.
There are some rules involved with this; for example, your broker must have the shares you want to borrow. In addition, you might not be able to sell the shares short while the price is going down (i.e. the stock's price has to be neutral or going up, if subject to what's called up tick or zero plus tick.
You must have a margin account in order to place short sales. When you use margin, you are borrowing money from E*TRADE Securities LLC based on the value of the cash and securities you currently have in your account. You're charged interest on the amount you borrow; and the holdings in your account act as collateral to secure the loan. You can hold the shares short as long as you meet the margin requirements for the position, and E*TRADE Securities LLC is able to continue to borrow the shares.
When you are conducting these types of transactions, you will need to enter a "sell short" order to "open" the position, and a "buy to cover" (not a regular buy) to "close" the position. The buy to cover effectively returns the borrowed shares to your broker.
The time it takes for your order to execute depends on a number of factors including the market activity, the price settings, and term limits you set.
For step-by-step instructions on how to place a trade, see "place a stock order"
For general information on investing in stocks, see "Invest in Stocks"
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ici pour modifier.
Les informations présentées ne constituent pas un conseil en investissement. Les présentes informations proviennent de sources extérieures et sont données à titre indicatif. CPG Invest et son Auteur Christian P. GATT, lui-même, ne sauraient être tenue responsable pour les dommages directs ou indirects résultants d'erreurs, d'omissions ou de modifications ultérieures des données.
Le placement en Bourse est risqué. Vous pouvez subir des pertes. Les performances passées ne préjugent pas des performances futures, elles ne sont pas constantes dans le temps. Avant toute décision d'investissement ou de désinvestissement dans ces produits, le Client doit impérativement apprécier ses choix en fonction de sa situation financière, de son expérience et de ses objectifs personnels en matière de placement (notamment en termes de degré d'acceptation du risque de perte en capital et de durée d'investissement envisagée).
ici pour modifier.