Classification of short selling According to the different objectives of short sellers, short selling can be divided into three categories:
1) speculative short selling. In this case, the short sellers is expected to sell shares to the stock price fell due to lower prices again when added into the same stocks, the price gap between the two is the short sellers short-selling profits. This speculative short selling, risks and profits are greater. Speculative short-selling on the stock market have a greater impact because when the short sellers to sell shares, the stock will increase the supply, stock prices will follow down; has added, the stock market, increased demand and prices with the the rise.
2) Short selling for hedging. The fundamental purpose of this short is to avoid the stock market price drop due to losses.
3 ) A technical short-selling. This behavior is further divided into three kinds of short selling: The first one is based on all his stock-based short selling, which includes for the purpose of taxes in order to hedge against inflation for the purpose of and in the expected delivery for the purpose of, etc.; the second Arbitrage is for the purpose of short selling, which have different markets at different times of arbitrage and arbitrage; third is operated by a broker or securities dealer short selling, which not only the professional members, securities dealers, as well as investment banks and other financial institutions.
Because of the speculative short sale, a greater impact on the stock market, short sellers act obviously speculative, and therefore laws of all countries have a more detailed requirements of short selling in order to minimize the adverse effects of short selling, In some countries prohibit by law the form of short selling stocks.
