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What exactly is short selling?

Simply put, short selling is an investment strategy with the motive of "buying low and selling high" to cash in some gains. Investors who short-sell stocks expect share prices to drop at some future date and aim to capitalise on this prediction to fetch some profits.

Why do investors short-sell stocks?

Investors who short-sell stocks expect share prices to drop at some future date and aim to capitalise on this prediction to fetch some profits. It depends on speculation. To short stocks, traders tend to sell shares that they do not actually own but are instead borrowed from a broker-dealer, thus opening a position for trade.

Are short-sellers risky?

Another risk for short-sellers is stock availability, as the short-seller must return the same number of shares they borrowed, even if there are fewer on sale. Some short-sellers have been able to predict price declines by examining company operations and financials for flaws.

What is an order to sell short?

When you enter an order to sell short, you are requesting to borrow the necessary stock shares to sell and placing an order to sell the borrowed shares per the order instructions – e.g., at a certain price. For example, you just sold 100 shares of Company Z at the current market price of $90 per share.

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