What Is a Short Position?
A short position, often called "going short," is a trading strategy where an investor borrows an asset and sells it, hoping to buy it back later at a lower price. The goal is to profit from a decline in the asset's value.
How Short Selling Works
An investor borrows shares from a broker and sells them on the market. If the price falls, the investor buys the shares back at a lower cost, returns them to the lender, and keeps the difference as profit. This process is sometimes referred to as "selling short." For a detailed breakdown of the mechanics and requirements, see the U.S. Securities and Exchange Commission guide on short selling at https://www.sec.gov/investor/short-selling.
Key Risks and Considerations
Short selling carries significant risk because losses can exceed the initial investment if the asset's price rises instead of falling. Investors must also pay borrowing costs and may face margin calls. It is a strategy typically used by experienced traders for hedging or speculation.
