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What do the terms Sell and Buy of a stock mean

Personal Finance & Money Asked on November 9, 2021

What is meaning of SELL and BUY of a stock, commodity, or ETF? When I choose any specific position of SELL or BUY, why do I have an immediate loss/profit?

For an instance I am doing paper trading on a platform and choose/bought SELL position of Silver at 18.70 $ while same time there is .05 $ difference in BUY position but I was in lose, so it was bit confusing for me. After few days SELL position value increase to 20.00 $ and I was in lose of 250 $ which is really weird for a newbie like me

One Answer

I am doing paper trading on a platform and choose/bought SELL position of Silver at 18.70 $ while same time there is .05 $ difference in BUY position but I was in lose, so it was bit confusing for me. After few days SELL position value increase to 20.00 $ and I was in lose of 250 $ which is really weird for a newbie like me.

I think I can guess what may have happened here.

It sounds like you looked at silver and saw that the bid price was $18.70 per ounce. So, you sold short (in other words, you opened a short position in) 200 ounces of silver, and received proceeds of 200 * $18.70 = $3,740 in cash. The market value of your short position was a negative number, -$3,740.

Almost immediately, another trade happened at $18.75, and so the platform showed the market value of your position as -200 * $18.75 = -$3,750. This is $10 lower than what it was before, so that showed as a $10 loss.

After a few days, the bid price (which you mistakenly called the "SELL position value") increased to $20. This meant that the market value of your short position decreased to -200 * $20 = -$4,000, which is a loss of $260 from when you opened the position.

Make sure you understand how short selling works before you engage in short selling. Otherwise, be careful not to sell an asset unless you already have that asset in your account. It looks like what you did in this case was sell some silver even though you didn't have any silver to sell.

Answered by Tanner Swett on November 9, 2021

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