◈ GLOSSARY · TRADING & MARKETS
Short Selling.
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
Borrowing shares from your broker, selling them at the current price, and hoping to buy them back later at a lower price — pocketing the difference. The math is rough: your maximum gain is capped at 100% (the stock goes to zero), and your maximum loss is theoretically unlimited because a stock can keep rising. Short sellers also pay borrow fees and can be forced to cover at the worst possible moment.
◈ IN PRACTICE
Example
You short 100 shares of a stock at $50, collecting $5,000. The stock falls to $40 and you cover — $1,000 profit minus borrow fees. If the stock rallies to $80 instead and your broker calls in the shares, you're out $3,000 on a position that started at $5,000.
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