Understanding Short Selling in Intraday Trading at FYERS - A Comprehensive Guide

What is short selling?

Short selling is a trading strategy where a trader sells a security they don’t own, expecting the price to drop. The goal is to buy back the security at a lower price and profit from the difference.

How does short selling work?

In a short sale, you borrow shares from the market and sell them at the current price. Later, if the price drops, you can repurchase the same quantity at the lower price and return the shares—profiting from the price difference.

Example:

  • You sell 100 shares of XYZ Ltd. at ₹550 (borrowed shares)
  • Market value received = ₹55,000
  • Share price drops to ₹540
  • You buy back 100 shares for ₹54,000
  • Your profit = ₹1,000

Important rules for short selling on FYERS

  • Allowed only for intraday trades: Short selling is permitted during intraday hours only.
  • Not allowed in equity delivery: You cannot short sell and hold the position overnight in the cash segment.
  • Auto square-off risk: If a short-sell position is not closed by the end of the day, it will enter auction settlement on T+1, and penalties may apply.

Alternatives to short selling (for multi-day positions)

If you want to express a bearish view beyond intraday:

  • Sell a stock future
  • Sell a call option
  • Buy a put option

These derivative instruments allow you to profit from price declines without borrowing the asset.

What If...

ScenarioExplanation
I short sell and forget to close my positionYour trade will go to auction, and you may face penalties.
I want to short sell for more than one dayUse futures or options instead of the cash market.
I short sell a stock not available for borrowingThe trade may get rejected or lead to settlement issues.
Use limit orders while short selling to manage entry prices and always square off intraday positions before 3:15 PM to avoid auction risks.

Last updated: 28 Jun 2025

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