short selling
Short Selling?
Usually when you buy a stock you buy it at the ask price which is higher and you sell at the lower bid price. When short selling a stock, could you buy a stock and immediately sell it and keep the difference?
Well no, the above poster is right you are shorting at the ask, and buying back at the bid, you lose. Usually short selling is done in margin accounts, which is essentially a loan. Second in your scenario you explained the bid and the ask don’t necessarily reflect the price you will actually pay and you could very likely lose money. Second the transaction fee associated on that transaction would likely result in a net loss, let’s say the bid ask spread is a $1.50, if you complete the transaction as stated above you will pay at minimum (if you use a site like e-trade) $8 to short it and $8 to buy it back so it cost you $16 to make $1.50 profit, you’ve lost $14.50. Lastly NASD day trading regulations make these types of transactions pretty much impossible.
Getting naked in short selling