Short Selling

What is Short Selling?

Short selling means borrowing shares from your broker and selling them, with the intention of buying them back at a lower price. The difference is your profit.

How it works

1. Borrow: your broker lends you shares (you may pay a borrow fee)
2. Sell: sell the borrowed shares at the current price
3. Wait: wait for the price to drop
4. Cover: buy back the shares at the lower price, return them to the broker

Risks

• Unlimited loss potential: a stock can theoretically rise infinitely
• Short squeeze: rapid price spikes when short sellers are forced to cover
• Borrow fees: hard-to-borrow stocks can cost significant daily fees