The term “sale of shares” is quite clear, and the process is quite simple. However, in the investment world, it has two different meanings. On the eToro platform, we use two terms to avoid confusion.
Closing the deal
On the eToro platform, closing a trade or closing a position means the end of an investment. For example, you previously purchased one share of EasyJet, which is now worth $832. When you close your position, you stop investing in EasyJet stock and receive $832 back into your account. You also cease to be an EasyJet shareholder.
Below is a screenshot of the closing of an EasyJet stock trade.
Learn more about closing positions
Closing a deal can refer not only to investing in stocks, but also to any type of financial asset on the eToro platform. Closing a deal is synonymous with the popular phrase “selling shares.” However, the term “sale of shares” or any other asset has a different meaning on the eToro platform, which is explained below.
Sale of an asset (or “short sale”)
The term “selling an asset”, sometimes referred to as “shorting” or “shorting”, is different from “closing a trade”.
Let’s say you want to buy Amazon stock or another financial asset on the eToro platform. You will see the following on the screen:
at the top, the option to BUY (green circle) or SELL (red circle) shares will be available. You may be wondering: how can I sell shares that I don’t own?
The answer to it is this: the term “selling” refers to “shorting.” This means that you open a position expecting a decline in the value of Amazon shares. This position is called a contract for difference (CFD) (see the blue box in the image). You are not actually selling an asset, but rather entering into an agreement with eToro, which “sells” your position. This agreement between you and eToro states that when the value of an asset decreases, you receive a certain amount of money, and when it increases, you lose it, depending on the amount of funds invested. Detailed information on the conditions of sale is available here.
BUY an asset
The screen image above shows the SELL option we have already discussed, as well as the BUY option. In this case, the term “buy” is synonymous with “long” or a long position. Purchase means the acquisition of an asset. For example, when you buy Amazon stock, you say, “I’m going to go long Amazon.” This means that you open a position expecting an increase in the value of Amazon shares.Thus, three conclusions can be drawn.
“Closing the deal” means the termination of investment in this asset. In layman’s terms, this is a “sale” of shares or financial assets.
Selling an asset as a synonym for “short selling” means entering into a contract with a broker or ordinary investment in the event of a possible decrease in the value of the asset.
Buying an asset marked “BUY” on the eToro platform means that you are buying an asset with the expectation that its value will increase.