Short selling is to expect a downward trend in the stock futures market. Operators will sell their chips at the market price, and then buy them after the stock futures fall, earning the middle price difference.

Shorting is the opposite of doing long. Theoretically, it is to borrow goods to sell first and then buy them back. The formal short-selling market has a platform for third-party brokers to borrow goods. Generally speaking, it is similar to a credit transaction.

This model can profit in the wave band of falling prices, that is, borrowing goods at a high level and selling them, and then buying and returning them after falling. So buying is still low, selling is still high, but the operating procedures are reversed.

Extended data:

Market implementation

1, securities

If investors want to sell securities short, they need to arrange to borrow securities for settlement. Investors need to deposit enough margin as collateral, pay interest to lenders, and pay dividends to lenders when they receive interest.

Lenders who lend shares will lose their voting rights. In the past, a large number of shares were lent in the process of privatization, and short sellers sent people to control the voting of shareholders after privatization, which led to the failure of privatization and the great losses of the original shareholders. Therefore, many privatized companies will advise shareholders to take back the lent shares.

2. Foreign currency

Short selling foreign exchange is different from short selling securities. Buying and selling foreign currency involves a currency pair and buying and selling different currencies at the same time. Sometimes, short selling foreign exchange can charge interest.

For example, investors expect the yen to depreciate, so they borrow yen from banks and buy dollars. When the Japanese yen depreciates, you can convert this part of the US dollar into more Japanese yen to earn the difference. If the deposit interest rate of US dollars is higher than the loan interest rate of Japanese yen, investors can earn a spread (carry trade).

The interest rate of Japanese yen has been at a low or even negative level for a long time, so it is the choice of speculators to borrow Japanese yen to buy high-interest currency.

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