About Short-Selling

[ssian]

Today, i received a call from my broker stating that i had a naked short-sell position.

In my heart and i blurted out, i was like;"What did you just say!"

All along, i thought all positions are to be done and settled on the 3rd day, but i was wrong. I had no idea that if i had a short-sell position, i had to settle it on the day itself...

Now about short-selling,
as we all know, buy low;sell high gain profits,
but about short-selling, the position is that you sell something without owing it and buy it back later to recover the selling position.

Thus, i went ahead and did a short-selling and for the first time, a huge mistake made. All along i thought that i had a period of 2more days ahead for me to close the position, but i was wrong.

Although the market was in my favour for the first day, the day itself i short, i didn't close my position, instead i waited for the arrival of the 2nd and 3rd day.

Greed is playing its part. Instead of earning a small amount of money, i had to fork out a huge price of penalty fee.


IMPORTANT:
If you short-sell a particular stock which you do not owe any in your account, DO buy back at the end of the day, before the trading period ends to close off your position. Else you will face the hefty consequences like i did for being a newbie !!!


Something to complain about vickersonline.
It's somehow quite inflexible when it comes to short-selling.
There is no way one can have a share opening account and there is absolutely nothing they can help.
It's time to look at other brokers instead of sticking to only 1agent.

[freedom]

you can appeal to SGX/CDP for a waiver of penalty fee.

the result should not be too bad. your broker could have helped you borrow share to settle first.

[ssian]

Yes, that was what i found out from my broker friend from another brokerage firm.
But it doesn't apply to Vickersonline.
There's no way you can borrow shares to settle, no alternative ways to go out of the situation i got myself into.
Hahaa a lesson learned though.
A GOOD ONE !

Now i can only pray that they don't impose the penalty
and pray that tomorrow, when they do the buying-in of that stock, not halting/suspension occur and if they drag the longer the duration, the higher the penalty would be.

[dydx]

The local settlement rules for the SGX market clearly penalize those who do naked short-selling, and I applaud that.

For the many newbies, my sincere advice is to avoid trading stocks - i.e. buying/selling or betting with a view to gain mainly from their short-term price movements - for all the well-known perils. Investing this way rarely makes one very rich; on the contary, many have lost their pants!

[Musicwhiz]

From my understanding, short-selling is done more efficiently using CFD instead of doing a "naked" short-sell which is far more risky. Of course, CFD is a form of leverage so those using it should bear in mind that they are actually borrowing scrip and that there is an interest charge (around 6% per annum?) for using this service. This simply means that if you cannot make a profit of at least 6% on your short (probably more if you factor in 2-way brokerage charges), then there is no point in carrying out the short-sale.

Another factor to note is that there is limited downside when going "long", but the downside is unlimited when you go "short"!

[vader1671]

Why not just buy a put option if you're going short?

It's safer, and your downside is definitely better than a naked short sale. Although I'm surprised that DBS Vickers didn't use that opportunity to charge you an arm and a leg to borrow some of their stocks.

[freedom]

can settle through other brokers actually.

you are settling with SGX/CDP not your broker.

[bongster31]

Hi,

one can use cfd to short sell.. u can use DMA through a DMA broker or cfds from a market maker. in addition, some of them has guaranteed stop loss features on their trading platform.

cheers,
bongster31