Short Selling

Short selling

Establishing a market position by selling a security one does not own in anticipation of the price of that security falling.

---

Short Selling

The act of selling a security one does not own. In short selling, an investor borrows a security and then sells it. In order to repay the borrowed security, the investor must buy the same security by the time the loan is due. This tactic exists to allow investors to make a profit when a security's price is declining. For example, if one borrows Stock X and sells it at $10 per share and later buys it at $5, then the short seller has made a $5 profit per share. However, if the price instead increases to $15, the short seller loses $5 per share. Short selling is a somewhat controversial practice, and is very common in hedge funds.