Summary of How Short Selling Works

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Short selling is a investment strategy where an investor sells a security today and buys it back in the future hoping that the price of the security will go down. This is the opposite of the long investing strategy of buy low sell high. Shorting on a stock is more complicated than going long on a position, and requires additional information such as margin accounts and margin calls.

• 00:00:00 Short selling is a trading strategy where an investor sells a security today and buys it back in the future hoping that the price of the security will go down. The strategy follows the same buy low sell high mentality as long investing, but it just reverses the order of the motto. Shorting on a stock is more complicated than going long on a position, and requires additional information such as margin accounts and margin calls.
• 00:05:00 Short selling is a strategy that allows investors to profit from the decline in the price of a security by borrowing the stock and selling it, hoping to buy it back at a lower price. There are several disadvantages to short selling, including the risk of being forced to cover the position at a loss, the risk of being "squeezed" when a stock's price surges due to short sellers buying back the stock to cover their positions.