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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It means you are expecting the stock to go down so you “borrow” the stock and promise to sell it at a later date. If the price goes up then you owe money, if it goes down then you make the difference.
You borrow the stock and sell it, betting it will go down in price and you will be able to replace the borrowed stock for cheaper.
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)
It means you are expecting the stock to go down so you “borrow” the stock and promise to sell it at a later date. If the price goes up then you owe money, if it goes down then you make the difference.
It means you are expecting the stock to go down so you “borrow” the stock and promise to sell it at a later date. If the price goes up then you owe money, if it goes down then you make the difference.
You borrow the stock and sell it, betting it will go down in price and you will be able to replace the borrowed stock for cheaper.
You borrow the stock and sell it, betting it will go down in price and you will be able to replace the borrowed stock for cheaper.
Cutting out all the details, when you short a stock, this is essentially what happens:
1) Today, you sell stock you don’t have, at today’s price.
2) Later, you have to buy that same amount of shares, so you have something to transfer to the person who bought from you.
3) If the price went down in the meantime, hooray, you just made a profit.
4) If the price went up, boo, you just lost money.
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)
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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