shortsell

Short selling is a financial transaction in which an investor sells a security they do not own or have borrowed with the expectation of buying it back later at a lower price. The profit is made from the difference between the sale price and the price at which the investor buys back the security. Short selling is also known as shorting or going short.

In a short sale, the investor first borrows the security from a broker or another investor, selling it on the open market at the current price. The investor then waits for the price of the security to fall, allowing them to buy it back at the lower price and return it to the lender, keeping the difference as profit. If the price of the security rises instead, the investor must buy it back at the higher price, incurring a loss.

Short selling is often used by investors to bet against a security or company that they believe is overvalued or in decline. It can also be used to hedge against potential losses in a portfolio or to profit from a security that is expected to fall in price. However, short selling also carries additional risks, including unlimited potential losses if the price of the security rises.

Regulations surrounding short selling vary by country and jurisdiction, and are often put in place to prevent excessive market volatility. Short selling is generally considered a sophisticated and high-risk strategy, and is often used by experienced investors. It is essential for investors to thoroughly understand the risks and mechanics of short selling before engaging in this type of transaction.