What does shorting a stock mean?

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  • BenutzernameMoneyland User Questions
  • Status Member
  • Registriert seit1/27/17
  • Beiträge2142

Can anyone tell me what it means to "short a stock"?

 
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  • BenutzernameMoneyguru von moneyland.ch
  • OrtSchweiz
  • Status Expert
  • Registriert seit8/4/15
  • Beiträge4079

Hi there,

"Shorting a stock," also known as "short selling" or "taking a short position on a stock" means you borrow shares in a stock and sell them immediately at the going price. When the loan term expires, you buy the shares you owe at the going price at the time, and return them to the lender.

If the price of the stock goes up during the loan term, you lose money because you have to buy the shares back at a higher price than you received when you sold them.

On the other hand, if the price of the stock goes down during the loan term, you save money because you can buy back the shares for a price that lower than amount you got for selling them. The difference between the higher price you got for the borrowed shares and the lower price you pay to buy them back is your profit.

Short selling makes it possible to profit when a company's stock price falls.

Because holding a short position on a stock can create an interest in harming the company and/or its stock price, short selling is regulated or even forbidden in some jurisdictions.

You can find basic information on this topic here:
Short-selling explained
Short position explained

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