2007-02-08 19:46:19 · 4 answers · asked by Nestor Desmond 6 in Business & Finance ➔ Investing
Selling short means that you are selling stocks (or other assets) that you do not own. This is mainly done by hedge funds, since you have to have special arrangements with your broker. The stocks that are sold short have to be borrowed from someone, typically big pension funds or mutual funds, for delivery to the buyer. At some moment in time the short seller will have to buy the shares back in order to fulfill his obligation to the lender of the shares to him.
Short selling is done when the investor believes a stock is overpriced. He will short sell the stock in the expectation to be able to buy them back at a later moment at a lower price, thus profiting from the price difference.
2007-02-08 20:06:08 · answer #1 · answered by Cheanea 3 · 3⤊ 0⤋
The 'correct' way of profiting from stocks is: "buy low, sell high".
Well, this could be reversed: "sell high, buy low". But how do you sell something you do not own? -- you borrow it
2007-02-09 04:22:59 · answer #2 · answered by Leo P 2 · 0⤊ 0⤋
'Selling short' means to dump your shares while the price is still high, in anticipation that the price will soon drop. In some cases this is part of schemes which involve artificially inflating the value, then selling short before the bubble bursts; part of the Enron scandal involved such a pattern.
2007-02-09 03:51:37 · answer #3 · answered by dukefenton 7 · 0⤊ 4⤋
Selling short is simply selling your stocks in the market.
2007-02-09 04:04:15 · answer #4 · answered by Muga Wa Kabbz 5 · 0⤊ 5⤋