Short Position

Short position

Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought back to close out the transaction. This technique is used when an investor believes the stock price will drop.

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short position

1. A net investment position in a security in which the security has been borrowed and sold but not yet replaced. Essentially, it is a short sale that has not been covered. Also called short. Compare long position.

2. An investment position in which the investor either has written an option or has sold a commodity contract, with the obligation remaining outstanding. Also called short.

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Short Position

The sale of a security or derivative, or the state of having sold one or the other. It is important to note that a short position is not closed, and is applied only to sales where further action may be required. For example, one who has borrowed securities and has then sold them is said to be have a short position with respect to that security, because he/she must eventually return an equivalent amount of the borrowed securities. Likewise, one who has sold (or written) an option is in a short position, because the option may be exercised at a later date. See also: Long position, Close a position.

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Short position. If you sell stock short and have not yet repurchased shares to replace the ones you borrowed, you are said to have a short position in that stock.

Similarly, if you sell an options contract that commits you to meet the terms of the contract at some date in the future if the option is exercised, you have a short position in that contract.

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Short (or Short Position)

What Does Short (or Short Position) Mean?

(1) The sale of a borrowed security, commodity, or currency with the expectation that the asset will fall in value. (2) In the context of options, it is the sale (also known as “writing”) of an options contract. The term “short” is the opposite of “long (or long position).”

Investopedia explains Short (or Short Position)

(1) As an example, an investor who borrows shares of stock from a broker and sells them on the open market is said to have a short position in the stock. The investor eventually must return the borrowed stock by buying it back on the open market. If the stock falls in price, the investor buys it for less than he or she sold it for, thus making a profit. Short sales are typically margin transactions. (2) Selling a call (or put) option contract to a buyer gives the buyer the right, not the obligation, to buy from (or sell to) the option seller a specific commodity or asset for a specified price and at a quantity by a specified date.

Related Terms:
• Bear Market
• Buy to Cover
• Long (or Long Position)
• Short Interest
• Short Squeeze