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

    • Related Articles

    • How to avoid short delivery?

      Short delivery occurs when you sell shares that you don’t actually hold in your Demat account or fail to square off intraday positions. This can lead to penalties and auction settlements. Fortunately, it’s easy to avoid if you follow some basic ...
    • Can I short futures contracts without owning the underlying shares?

      Yes, you can short futures contracts without owning the underlying shares. This is possible because futures contracts are settled in cash, so there is no need to hold the actual asset in your Demat account. How it works? Shorting a futures contract ...
    • What penalties does a seller face for short delivery of shares?

      Short delivery occurs when a seller fails to deliver the shares they sold. In such cases, the exchange intervenes to fulfill the obligation to the buyer, and the seller incurs penalties based on settlement rules. What happens during short delivery? ...
    • What happens if my intraday equity short position isn't closed by end of day?

      If you initiate an intraday short sell in equity and fail to square it off before market close, it can result in short delivery—a situation where the exchange must intervene to fulfill the trade. What is short delivery? You sell shares without ...
    • What does short delivery mean and how does it impact me?

      Short delivery occurs when a seller fails to deliver the promised shares within the expected settlement cycle. This situation typically arises when the seller sells shares they don’t possess or when the stock has low liquidity. Sequence of events ...