How to Calculate Returns on Short Positions

Making money with investments can involve buying and selling stocks. One of the most profitable ways to make money with stocks is to short sell, or buying a security from your broker-dealer and selling it, along with the stocks you just bought at a lower price, for profit. When you decide to make a short sell, calculate the return on your short position to see how it benefits you financially.

Things You'll Need

  • Calculator
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Instructions

    • 1

      Write down the current price per share of the stock you are short selling. For example, if a share of "EG Industries" stock is currently worth $12.20, write "$12.20 per current share" on a piece of paper.

    • 2

      Write down the price per share of the stock when you bought the security through the broker-dealer. For example, if you bought the security when the shares were worth $15 apiece, write down "$15 per security share."

    • 3

      Multiply the security's number of shares by their previous price. For example, if you got 50 shares of EG Industries through the security, multiply 50 by $15 to get $750. Write this number down.

    • 4

      Add up the total number of shares you own. For example, if you own 50 shares through the security and 50 shares through the open market, add 50 to 50 to get 100 total shares. Write this down.

    • 5

      Multiply the total number of shares by the current price per share. For example, with 100 shares of EG Industries at a current price of $12.20, multiplying the two numbers gives you $1,220. Write that down.

    • 6

      Subtract the security's previous total cost to you from the shares' current value if you sold all of them back to the broker-dealer. For example, with a current value of $1,220 and a previous cost to you of $750, the subtraction gives you $470. This is the return you would make on the stocks if you sold them back right now.

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