can I get help with 3 and 4 Short selling The other way of profiting from a fall

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can I get help with 3 and 4

Short selling The other way of profiting from a fall in about 400 years old. The ke rather than in money. Yo Here is how it works. Say you a stock price is through short selling, Short selling is also y to short selling is a lending market that takes place in shares of stock u borrow stocks, and must pay back the shares of stock plus interest. believe a stock price will fall, and a lending market exists where of the stock. (This will exist for most major publicly-traded stocks, though u can borrow shares not for all stocks.) (1) You borrow 1,000 shares of the stock. (2) You sell the 1,000 shares at the current stock price of $50 a share, giving you $50,000. You are now waiting for the stock price to fall. The stock price falls to $40 a share. You decide to close the trade, and you buy 1,000 shares for $40,000. You pay back your loan of 1,000 shares (plus interest, of say, $200). Your net return is (3) What would happen if the stock price never falls below $50 a share? Say you close the trade at a price of $55. (Assume the interest is $200). Your net return is (4)

Explanation / Answer

Net return would be Amount received on shorting / selling of shares minus Amount of shares paid back along with interest.

3) Net Return = $50000 - $40000 - $200 = $9800

as % of cost = $9800 / ($40000 + 200) = 24.38% [cost being the amount paid back]

4) Net Return = $50000 - ($55 x 1000) - $200 = (-)$5200

as % of cost = (-)$5200 / ($55000 + $200) = (-)9.42%

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