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Understanding The Order Book & Mechanics of Short Selling in Stock Trading

Learn how brokers connect to exchanges, types of orders, and additional possibilities like sell short and more complex orders. Delve into the mechanics of short selling, borrowing shares, and managing assets and liabilities effectively.

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Understanding The Order Book & Mechanics of Short Selling in Stock Trading

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Presentation Transcript

  1. The Order Book (recap) • Ask $100.10 100 • Ask $100.05 500 • Ask $100.00 1000 • Bid $99.95 100 • Bid $99.90 50 • Bid $99.85 50

  2. How Brokers Connected to Exchanges

  3. Types of Orders (with your Broker) • Additional possibilities: • Sell short (to open) • Buy (to close) • More complex orders (stop limit)

  4. Mechanics of Short Selling • Borrow the shares • Sell them • You now have: • Asset: Cash • Liability: Shares owed

  5. Short Selling Example

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