Introduction to Short Selling

This site introduces the concept of, short selling or "shorting" which is a way to profit from the decline in price of a security, such as stock or a bond. To profit from the stock price going down, a short seller can borrow a security and sell it, expecting that it will decrease in value so that they can buy it back at a lower price and keep the difference.

Gives a brief history o the practice of short selling including the fact that it has been the target of ire since at least the 18th century when banned it outright. Short sellers are widely regarded with suspicion because, to many people, they are profiting from the misfortune of others. However, academic studies have generally lauded short-selling as an important contribution to stock market efficiency.

Explains in simple terms the basic steps that are involved in short selling stock. The investor initially borrowing shares from a broker by paying some margin money, selling them, buying them back at a later date and paying up the balance amount to the broker, and finally returning the shares to the original lender.

This site explains the concept behind short selling, which is the opposite of "going long". The short seller takes a fundamentally negative, or "bearish" stance, anticipating that the price of the shorted stock will fall and that it will be possible to buy at a lower price whatever was sold, thereby making a profit.

Highlights the risks involved in short selling which is quite different from the traditional method of buying stocks at a lower price and then selling them later at a higher price. In short selling, the possible gains are limited, but the seller can lose more than the original value of the share, with no upper limit.