What Is Short Selling? Meaning & Example
Definition
Short selling means borrowing an asset and selling it, hoping to buy it back later at a lower price. Losses can be very large because a price can keep rising.
Related terms
A long position means owning an asset with the expectation that its price will rise. It is the most common way people invest.
MarginMargin is money borrowed from a broker to buy investments, or the collateral required to hold a leveraged position. Trading on margin increases risk and involves interest costs.
LeverageLeverage means using borrowed money or derivatives to control a larger position than your own capital alone allows. It magnifies both gains and losses.
What is Short Selling?
Short selling means borrowing an asset and selling it, hoping to buy it back later at a lower price. Losses can be very large because a price can keep rising.
Can you give an example of Short Selling?
Shorting a stock at $40 and buying it back at $30 earns $10 per share, but if it rises to $60 the loss is $20 per share.