I assume this is related to stocks and investing, but what does it mean short a stock? Like I’ve seen people asking if it’s time to short Netflix.
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Shorting is a form stock trading that is done when the investor believes that a stock is overvalued (ie price is going to fall). Essentially, think of shorting as the “opposite” of buying (or going “long” in investment speak).
In a covered short (more lingo), the investor goes to the brokerage and borrows the shares of a company with the promise to return those shares later (usually a fairly short period < 1 year). They pay a fee to borrow these shares. The investor then sells these borrowed shares at the current market price and hopes that the share price falls before they have to repurchase the shares to return them to the lender.
If the share price falls, then the investor profits because they “sold high, and bought low”. If the share price remains the same or increases, then the short loses money – potentially a LOT of money. Shorting is time limited and highly risky since, in theory, the amount of loss is unlimited (share price can go up with no limit)
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