Is this possible to make money in the stock market
Is this possible to make money in the stock market while the quotations are going down? And what is credit sale?
Expert
Three easy moves are here to make money while prices are going down: futures sale, purchase of put options and credit sale. Credit sale of a share means borrowing this and sell this afterwards. For case in point, we sell the share today at a specific price as €10 but we owe a share to the institution that lent this to us. If the quotation of the share goes down to 8 Euros the following week, we buy the share and provide it back to the institution which borrowed it to us and cancel out our position. In such case, we will have earned 2 Euros (the 10 Euros we earned by the sale of the share minus the 8 Euros we paid to buy this).
Meanwhile, obviously, we will owe a share to the institution that lent this to us and they will ask for several guarantees to cover the debt. Futures sale is very the same to credit sale but with the advantage which, normally, the guarantees demanded are lower. For illustration, an investor who sold a futures contract on the IBEX 35 at Friday 18th of January, while this was at 13,900 points, and closed his position with buying a futures contract the same to the one he sold on Monday 21st, when this was at 12,700, would have earned 12,000 Euros. The computation is a lot easier: 10 Euros for a point. The price fell through 1,200 points and, thus, the investor gained 12,000. But when the IBEX 36 had gone up, the investor would have lost 10 Euros for all points.
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