Short Selling: 5 Steps for Shorting a Stock
The commonly understood way investors make money off stocks is simple: Buy a stock with the anticipation that its price will rise over time, and if it does, sell it later for a profit. This is considered “going long.”
But stocks don’t have to go up for investors to make money off them. Investors also can profit if the stock price falls — and this is the infamous short sell.
What is short selling?
Short selling a stock is when a trader borrows shares from a broker and immediately sells them with the expectation that the share price will fall shortly after. If it does, the trader can buy the shares back at the lower price, return them to the broker, and keep the difference, minus any loan interest, as profit.
Here’s an example: You…
