Hello. After watching the Shorting video, I was left with a question. Now, I think, understand the process; so buying 100 shares at $42 each=$4,200, sell the same 100 shares at $58=$5,800…ok was $1,600 made twice, for a total profit of $3,200?
No just once. Remember, you are borrowing the shares of stock from the lender (100 shares worth $5.800), then selling the stock to the market for $5,800. Then you are coming back in to buy the new market rate of $42 per share (at $4,200). Therefore the $5,800 in your account minus the $4,200 (you bought back in shares of stock) is $1,600 left in your account. You have to give back the shares because you are only borrowing the shares which is why you get to keep the profits.
Hello. After watching the Shorting video, I was left with a question. Now, I think, understand the process; so buying 100 shares at $42 each=$4,200, sell the same 100 shares at $58=$5,800…ok was $1,600 made twice, for a total profit of $3,200?
No just once. Remember, you are borrowing the shares of stock from the lender (100 shares worth $5.800), then selling the stock to the market for $5,800. Then you are coming back in to buy the new market rate of $42 per share (at $4,200). Therefore the $5,800 in your account minus the $4,200 (you bought back in shares of stock) is $1,600 left in your account. You have to give back the shares because you are only borrowing the shares which is why you get to keep the profits.