Financial Poise

Short Selling

  • July 26, 2022
« Back to Glossary

An investor who sells short (or ‘shorts’ or ‘short sells’) stock is essentially betting that the price of that stock will go down.

This is done by borrowing shares of stock, selling those borrowed shares, and then later buying shares of the same stock for a price that is lower than the price the person sold the borrowed shares for.

The short seller then ‘returns’ the borrowed shares with the newly purchased shares.

Shorting is not limited to stocks. One can short any security.

The subject is both more complicated and more nuanced than this definition explains. It suffices, however, because those who follow Financial Poise do not short stock. If you wish to learn more, however, this Charles Schwab article is as good a place as any to start and this 10-minute video from The Plain Bagel is excellent.