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Financial Encyclopedia

Short selling


Short selling is the sale of assets borrowed from a broker. In other words, this is the sale of securities, currencies or goods that the trader does not currently own.


The trader wants to short 20 stocks, the cost of each is 400 rubles. However, he does not have these shares, so he borrows from a broker. Next, the trader sells shares for 8 thousand rubles. He expects prices to fall, and his expectations are justified - now one share costs 320 rubles. He buys 20 shares for 6400 rubles and returns to the broker. Trader's earnings is a difference of 1600 rubles.

More detailed

Short selling occurs when an investor borrows a security and sells it planning to buy it back later for less money. To do this, he sells the paper at a higher price, then buys it back when the price drops and returns it to the broker/lender.

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