Selling Short

Joe, what does it mean to be a short seller?

Very good question. Here's a definition of selling short as it applies to the stocks and ETFs: Short Selling (also known as "shorting," "selling short" or "going short") refers to the sale of a security or financial instrument that the seller has borrowed to make the short sale. The short seller believes that the borrowed security's price will decline, enabling it to be bought back at a lower price. The difference between the price at which the security was sold short and the price at which it was purchased represents the short seller's profit (or loss, as the case may be).

There are speculators who are actually known as "short sellers." The above definition applies to them. However, a trader can "go short," without becoming a "short seller" as such. Selling any underlying asset that you don't own is going short. The main reason for going short is to be able to buy back at a lower price than the price you received for selling any underlying asset.

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