Short Selling
Also called: shorting
Betting a stock will fall by selling borrowed shares now and buying them back later.
A short seller borrows shares, sells them, and hopes to buy them back cheaper, pocketing the difference. It is risky because a stock can rise without limit, so losses are theoretically unlimited. A "short squeeze" happens when a rising price forces shorts to buy back fast, pushing it even higher.
For example
Short 100 shares at $20 and buy them back at $15, and you make $500. But if it rockets to $40, you lose $2,000 buying them back.
Related terms
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