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Wednesday, 7 November 2012

My Short selling Experience by Abdul zelani


Another horrible experience....BAD.. Bad...... muhhhhhhhhhhhh!

Rather than seeing it as a loss i ‘ll say good experience with small loss

Today  I shorted 8 shares of INFY @2401 at around 11 am. And with in two hours it went down to 2390 and then i bought(Short cover)  4 shares at this price..and i was thought it will go to lower than this so at 2.40 pm I made bid of 2385 for remaining 2 and I thougt it will definetly touch this prices and will be traded and then I attended 3-4 and 4-5 classes.. I got a SMS that 4 shares were traded and i thought 8 shares were coverd ...but not,I have misunderstood...it was the previous trade SMS
And here comes..I got a horrible mail from Mumbai head office that 6 shares were bought  in auction at 2400 and a penalty of 2% i.e  200 rs + 0.2% intrest very day for 4 days (because i bought it on margin)and some other unknown charges... so totally i lost Rs 242 due to my memory power and 3-4 PEP Class.and next i have called to My broker and shouted and regret for my mistake and then he talked for 20 min and here is what he said in brief..

When you sold short (seller shortage) those shares there was someone on the other side who bought them. He won't get delivery. So your broker will try to purchase them in a buy-in auction market on T+2 day and the settlement of the auction shall be done on T+3 day (where T is the transaction day, holidays are not included).

If the auction is successful the defaulting client (you) will have to pay the actual auction price + interest + a penalty of 2%.

What will be the auction price - That depends on the price of the stock on auction day. The lowest or minimum offer price in auction can be 20% below the closing price on a day prior to the day of auction. If it's lower then you might gain but this difference is not given to you it goes to Investor Protection Fund, if it's higher you will have to pay the difference. Your broker will send you an email at the end of day with the detailed information.

If the auction is not successful, no one is ready to sell in the auction (generally happens when the stock hits upper circuit), the sell transaction is cancelled by the exchange and the defaulting member has to pay the highest price prevailing from the day of trading up to a day prior to the auction day or 20% above the official closing price on the day prior to auction day, whichever is higher. The buyer of those shares gets a full refund. Auction is carried out in case of Short deliveries and Bad deliveries.

My recommendations..

1)      If you are utilising or buying Scrips on Margin then be very carefulll.don’t utilise your full margin limit it’s very danger if you are amateur in Capital Market
2)      Check your order status at 3.15 pm be sure that it was not still open and sell it at current market price don’t try to bargain or don’t Use Bid Ask spread techniques
3)     REMEMBER! While you are Short selling you have to Sell and Buy on the same Exchange if You accidently buy them on BSE while you sold them on NSE it will not be covered because there were no depository in this situation
Ignore Spelling and Grammar mistakes...
Indeed it was technical to understand,it took me 2 days to understand this whole concept.if you have any dought Please give me feedback or any extra information about this topic ....please feel free to say any thing ...it will help me to improve my skills in In upcoming blogs...
you can mail me personally
thecfo@in.com
zelani.ceo@gmail.com



Abdul Zelani,
Lovely Professional University.

1 comments:

  1. Hi Abdul,

    If you are going to copy paste most of the article from our website, you should atleast put the link of the website from where you copied the info.

    Craytheon.com

    ReplyDelete