ECONOMICS (CBSE/UGC NET)

ECONOMICS

FINANCIAL MARKETS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
What is a bank position when it has less cash holding?
A
Shortage position
B
square position
C
long position
D
short position
Explanation: 

Detailed explanation-1: -A short, or a short position, is created when a trader sells a security first with the intention of repurchasing it or covering it later at a lower price. A trader may decide to short a security when she believes that the price of that security is likely to decrease in the near future.

Detailed explanation-2: -Having a “long” position in a security means that you own the security. Investors maintain “long” security positions in the expectation that the stock will rise in value in the future. The opposite of a “long” position is a “short” position. A “short” position is generally the sale of a stock you do not own.

Detailed explanation-3: -With short selling, it’s about leverage. Investors sell stocks they’ve borrowed from a lender on the expectation the price will drop. The hope is to rebuy and replace the stocks they borrowed at a lower price.

Detailed explanation-4: -For example, you enter a short position on 100 shares of stock XYZ at $80, but instead of falling, the stock rises to $100. You’ll have to spend $10, 000 to pay back your borrowed shares-at a loss of $2, 000.

There is 1 question to complete.