Shorting Futures Without Underlying Shares

Can I short futures contracts without owning the underlying shares?

Absolutely. With FYERS, you can short futures contracts without the need to hold the underlying shares. This is because futures contracts are settled in cash, eliminating the requirement for physical possession of the securities in your Demat account.

When you short a futures contract, you're speculating that the price of the underlying asset will decrease. If the price does drop, you stand to gain. Conversely, if the price rises, you will incur a loss. This strategy can be a powerful tool in a trader’s arsenal, but it comes with the caveat of increased risk, as losses can exceed the initial margin if the market moves against the position.

It's crucial to ensure that you meet the margin requirements prescribed by the exchange to maintain your short position. The margin acts as a security against the credit risk associated with the futures contract.

In sum, shorting futures is a strategic decision that traders make based on their market outlook and risk appetite, and it can be done without the actual shares in your possession, courtesy of the cash settlement mechanism in futures trading.

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