Question

Suppose that you expect SugarCane stock price to decline. So you decide to ask your broker to short sell 2000 shares. The current market price is $40. The proceeds from the short sale $80,000 is credited into your account. However, a few days later the market price of the stock jumps to $80 per share and your broker asks you close out your position immediately. What is your profit or loss from this transaction?

Answer 1

Loss = $80000

Explanation:

To determine if it's a profit or loss is simple.

He predicted the sugar cane stock to fall so he sold , but few days later the stock grew and went bullish.

He sold at$ 40 for 2000 shares

=$ 80000

But the stock went up to $80 per share that is gaining extra $40

So it was actually a loss.

The loss is =$40 * 2000

The loss = $80000