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I know that question was asked here numerous times but I don't think it was ever answered clearly.

When I'm short selling a security (stock/future...) I pay a bid price (with a MKT order - when I want to have my order filled immediately) and when closing this position I am paying ask price (I'm actually purchasing to return the security I've borrowed and sold).

When I'm buying a security I pay ask price, when closing I pay bid price (I accept a highest bid on security I currently own).

Am I right?

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You are correct.

Think about is this way:

If someone makes a bid - they are placing a bid to buy something. So if you want to sell something, you need to find a buyer, and would be getting the bid price.

Similarly, if someone is selling something, they are asking for money in return, so when you buy a security you pay the ask price.

Another way to think of it is the bid is always lower than the ask (hence the bid-ask spread. Since you can't sell something immediately for a higher price than you pay for it, you always get the lower price (bid) when you sell and pay the higher price (ask) when you buy.

  • Thanks! With short selling am I also correct? Thats what I'm quite uncertain. – yety Jul 3 '17 at 23:43
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    Yes. Whether you're opening a short position or closing a long position, selling is selling. – D Stanley Jul 4 '17 at 0:16

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