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    Question

    When traders first sell securities without first borrowing them or having possession of those securities, that is called:

    A Covered short selling Correct Answer Incorrect Answer
    B Naked short selling Correct Answer Incorrect Answer
    C Aggressive selling Correct Answer Incorrect Answer
    D Selling without recourse Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Short Selling is the sale of securities that the seller has borrowed rather than owning. The transaction is accompanied by pledge to acquire the stocks at a later date. As per SEBI norms, short selling shall be defined as selling a stock which the seller does not own at the time of trade. All classes of investors, viz., retail and institutional investors, shall be permitted to short sell. When traders do not have possession or do not borrow those securities while doing a trade its called naked short selling. Naked Short selling is not permitted in India

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