Learning the Lingo - Short Sale

Selling short
If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.

Short interest
This is the total number of shares of a security that investors have sold short -- borrowed, then sold in the hope that the security will fall in value. An investor then buys back the shares and pockets the difference as profit.

Short position
Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought to close out the transaction. Technique is used when an investor believes the stock price is going down.

Short sale
Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.

 

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Comments

[sweet Home Oregon Real estate]

Short sales are looking even better right now. I noticed the inventory is raising locally. Might be a good thing for investors.