What Does It Mean To Short Sell A Stock?

Short selling means that you expect the price to decrease. Whether that’s a single stock, the entire sector, or anything in between. It’s like betting on the losing horse. Would you bet for that?

In general, investing in the stock market can be experienced as difficult by some and risky by others.

What Is Short Selling?

Shorting a stock means that an investor buys shares and sells it in the market, planning to buy it back later at a lower price.

Examples Of Short Selling

You have Stock A, and buy 100 shares for $100 per share. The earnings were better than expected, making for a $110 price per stock. Now you have to buy your shares back at $110 per share, totaling $11,000, and return them to your broker.

Risks Of Short Selling

Losing Money – you can lose money when a stock price rises. This downside can be unlimited, as stock prices can increase unlimitedly in theory.

Pros And Cons Of Short Selling

Pros: – Opportunity for high profits – Possibility to leverage – As a protection (hedge) against other holdings

Pros And Cons Of Short Selling

Cons: – Unlimited losses – Short squeezes – Pay interest on leverage