Your Step-by-Step Guide for Shorting Stocks
Short selling is a trading strategy where investors speculate on a stock’s decline. Short sellers bet on, and profit from a drop in a security’s price. Traders use short selling as speculation, and investors or portfolio managers may use it as a hedge against the downside risk of a long position.
Key Takeaways
- Short selling occurs when an investor borrows a security and sells it on the open market, planning to repurchase later for less money.
- Short sellers bet on and profit from, a drop in a security’s price.
- Short selling has a high risk/reward ratio, offering big profits, but losses can mount quickly and may result in margin calls.
Jessica Olah / Investopedia
How Shorting a Stock Works
Traders commonly engage in…
