Suppose I short sell a share and then it hits upper circuit. Then it goes to auction but for next 2 days it falls and the auction day if the price is lower then my shorting price is it possible to make profit from such trade?
You won't make a profit if you fail to give delivery, no matter what the price of the stock is on the day of the auction.
If the auction rate is less than the price that you sold the stock for, the profit is credited to the "Investor Protection Fund".
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However, in case, auction/ close-out price is lower than standard price, the difference is not given to the seller but is credited to the Investors Protection Fund.
If he shorts on Monday, and the price falls over the next two days, the auction will still be held at the highest price, which should be Monday's price, and there is the penalty as well, so how can the auction price be below the short-selling price?
If he shorts on Monday, and the price falls over the next two days, the auction will still be held at the highest price, which should be Monday's price, and there is the penalty as well, so how can the auction price be below the short-selling price?
You are getting confused between auction and close-out.
Auction means that the exchange buys the shares from the auction market and delivers the shares to the actual buyer. The price at which the shares are bought from the auction market may be lower than price of the initial trade.
The question of highest price arises only when the exchange is unable to buy the shares from the auction market. In that case, the position is closed-out and the original buyer is given cash and not shares.
Profit from Short Delivery?
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