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I have a confusion in understanding the concept where we decide that we should sell now buy later ..it means selling what now ??.since we are performing a hedging strategy now ..at this point of time when I decide to sell now buy later ..what is that which I should sell ?? …
If I am in any transaction that I m going to hedge with future …and I decide that I sell now …and buy later ..what is that which I would sell as I don’t buy anything ..can u please interpret ?
I understand that if I buy now sell later that makes sense to me that something I bought could b sold later …but what we mean by the term sell now buy later ..I m confused
Yet again, I spend time explaining the concept in my free lectures.
The way the stock exchanges and derivative exchanges work, it is perfectly possible to ring the dealer and tell him to sell some shares (even though you don’t actually own the shares at that time). However when it comes time to settle up with the dealer, you have to then buy shares (so as to be able to fulfil the deal) and at that stage you settle up the cash difference with the dealer (he pays you if the price has fallen, you pay him if the price has increased).
Exactly the same procedure happens with things like foreign exchange futures.You really should watch the lectures – I cannot keep typing them out here 🙂
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