Short Selling Explained
If you say in Inkling that the chances/value/date were lower/earlier than whatever the current stock price was at the time, you've made what professional traders call a "short sell."
- Selling short means you think the answer is not going to happen.
- The more shares you sell short, the stronger you feel the answer will not happen.
- If the answer doesn't happen, you will make money. If the answer does happen, you will lose money.
Short selling has a different affect on your available balance than long positions.
When you take a short position, you're saying you think the final answer is going to be worth $0/share or at least lower than what the current stock price is. But what if you're wrong and the final answer is worth $100/share or is higher than the current stock price? To cover you in this worst case scenario since we can't go after your car or house, we hold money back from your "available to trade" balance.
Specifically:
For questions where you're being asked what the chances of
something occurring are, we hold back: $100 * Number of shares sold
short. If you sold short more than one answer, we only hold back
money to cover the biggest position.
For any other types of questions we hold back: (Current price * 2)
* Number of shares sold short
Thus when you sell short you'll see money removed from your available balance, but money added to your savings to cover the short position.