Short selling is the sale of a security that is not owned by the seller or that the seller has borrowed in the hope that the price will go down.
 | | Short Selling | Short selling is the sale of a security that is not owned by the seller or that the seller has borrowed. Short selling is motivated by the belief that a security's price will decline, enabling it to be bought back at a lower price to make a profit. Short selling may be prompted by speculation, or by the desire to hedge the downside risk of a long position in the same security or a related one. Since the risk of loss on a short sale is theoretically infinite, short selling should only be used by experienced traders, who are familiar with the risks.
| | Breaking it Down: | | Consider the following example: A trader believes that stock SS, which is trading at $50... | | Read More » | | Related to "Short Selling" | | | | Short selling basics | | Short sellers enable the markets to function smoothly by providing liquidity and also serve as a restraining influence on investors' over-exuberance. | | Read More » | | | Long-Short Ratio | | A long-short ratio represents the amount of a security available for short sale compared to the amount of that security that is actually short-sold. | | Read More » | | | Net Long | | Net long refers to a condition in which an investor has more long positions than short positions in a given asset, market, portfolio or trading strategy. | | Read More » | | | Cushion Theory | | Cushion theory is the expectation that the price of a stock that has been heavily shorted will eventually rise if or when the short positions are covered. | | Read More » | | | Short Squeeze | | A short squeeze is when a heavily shorted security moves sharply higher, forcing short sellers to close out their positions and add to the upward pressure. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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