Short selling is a form of trading that can yield significant profits but also carries inherent risks. Learn about short selling and how it works in the derivatives market in the article below.
1. What is short selling?
Simply put, short selling is the act of selling an asset that the seller does not currently own. Typically, the short seller borrows the asset from someone else to sell it, hoping the price will drop, allowing them to repurchase it at a lower price to return to the lender and profit from the price difference.
2. What is short selling in the derivatives market? How to short sell in the derivatives market
The term "short selling" in commodity derivatives trading is similar to securities trading but applies to commodity contracts instead of stocks, such as futures contracts.
Currently, the State Securities Commission does not allow investors to short sell on the primary stock market. However, investors can short sell in the derivatives market.
In some markets, to execute a short sale, investors may need to post a margin to cover risks if the market does not perform as predicted. A margin is an amount of money or assets used as collateral.
The specific margin amount depends on the regulations of each exchange and type of asset. Typically, the margin is calculated based on the value of the futures contract or the value of the asset the trader intends to short sell.
To simplify the steps of short selling in the derivatives market, investors can also use reputable and convenient financial applications like Anfin. On August 30, 2023, Anfin was recognized as a trading member by the Vietnam Commodity Exchange (MXV), the unit controlling derivatives commodity trading in Vietnam.