short sale

Short sale

Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.

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short sale

The sale of a security that must be borrowed to make delivery. Short sales usually, but not always, entail the sale of securities that are not owned by the seller in anticipation of profiting from a decline in the price of the securities. A short sale is not permitted when the last preceding different price was higher than the current price. Also called selling short, short. See also fictitious credit, ghost stock, lending at a premium, lending at a rate, odd-lot short sales, Rule 10a-1, short against the box, short cover, synthetic short sale.

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short sale

In real estate,the lender's agreement to release its lien upon property so that the property can be sold, even though the sale price will not generate enough money to pay off the loan. Investors who specialize in purchasing preforeclosure properties will often negotiate a short sale price with the lender as part of their strategy.Oftentimes,the lender will agree to forgive the balance of the mortgage debt.

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Short Sale

An agreement between a mortgage borrower in distress and the lender that allows the borrower to sell the house and remit the proceeds to the lender.

Ashort sale is an alternative to foreclosure or a deed in lieu of foreclosure. See Payment Problems/Position of the Lender/Permanent Problem.

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Short Sale

What Does Short Sale Mean?

A market transaction in which an investor sells borrowed securities in the hope that the share price will fall some time in the future; short sellers are required to return (cover) an equal number of shares at some point in the future. The payoff for selling short is the opposite of that of a long position. A short seller makes money if the stock goes down in price, whereas a long buyer makes money when the stock goes up. The profit that the investor receives is equal to the value of the borrowed shares minus the cost of repurchasing the borrowed shares.

Investopedia explains Short Sale

Suppose an investor sells short 1,000 shares at $25; the investor's account then is credited $25,000. Let's say the price falls to $20 and the investor closes out (buys back) the position. To close out the position, the investor will need to purchase 1,000 shares at $20 each ($20,000). The investor's gain/profit is the difference between the amount that he or she receives from the short sale and the amount that was paid to close the position, in this case a profit of $5,000. There are margin rule requirements for a short sale in which 150% of the value of the shares shorted must be on hand at the time of the transaction. Therefore, if the value is $25,000, the initial margin requirement is $37,500 (which includes the $25,000 of proceeds from the short sale). Investors cannot use the proceeds from the sale to purchase other shares before the borrowed shares are returned. Short selling is an advanced trading strategy with inherent risks. Novice investors should avoid this strategy because its risks are unlimited. A stock price may fall to $0 but could rise to infinity.

Related Terms:
• Buy to Cover
• Minimum Margin
• Short (or Short Position)
• Naked Shorting
• Short Covering

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Short Sale

A sale in which the seller borrows the stock certificates or other property delivered to the buyer. At a later date, the seller either purchases similar stock or property necessary to "cover" the sale, and delivers it to the lender or delivers to the lender stock or property that he or she already held but did not wish to transfer at an earlier date. For income tax purposes, there is no gain or loss on the transaction until the short sale is covered by purchase and transfer. Special rules apply in determining whether the gain or loss on a short sale is a long-term or short-term capital gain or loss.