Investing Sr. Associate
Joined: 25 Aug 2006
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Location: Jacksonville, FL
28606.87 e$
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| deprived wrote: | | How does shorting stocks work? |
Short selling, or “shorting” a stock, is, simply, selling shares of stock you do not own. It’s where you, the investor, have identified a stock whose price you expect will fall. You want to profit from the price decline, so you ask your broker to permit you to sell the stock, even though you don’t own any shares of it.
If your broker has granted your permission to sell short in your account, he will either loan you the shares from his portfolio, or he will have to enter the market to see if he can find shares to borrow for you to sell short.
Most likely your short sale will be subject to a time limit, perhaps 30 or 60 days, at the end of which you will have to buy the shares back to repay the loan of the shares you sold short. Buying stock you have previously sold short is called “covering” or “short covering”. |
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