Selling Short

Selling short

Selling a stock not actually owned. If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug. 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.

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Sell Short

To sell borrowed securities. In selling short, one borrows securities, usually from a brokerage, and sells them. One then buys the same securities in order to repay the brokerage. Selling short is practiced if one believes that the price of a security will soon fall. That is, one expects to sell the borrowed securities at a higher price than the price at which one buys in order to return the securities. Selling short is one of the most common practices of hedge funds. See also: Margin account.

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Short Sale

The sale of borrowed securities. In a short sale, one borrows securities, usually from a brokerage, and sells them. One then buys the same securities in order to repay the brokerage. Selling short is practiced if one believes that the price of a security will soon fall. That is, one expects to sell the borrowed securities at a higher price than the price at which one will buy in order to return the securities. Selling short is one of the most common practices of hedge funds. This is also called establishing a bear position. See also: Margin account.

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selling short

See short sale.