Short Selling

1 min read

Short selling is an investment strategy that allows a trader gain a negative exposure to an asset. Short selling is done by borrowing an asset and then selling it without ever owning it.

The short seller will eventually need to buy the asset to return it to the original owner. If the asset is cheaper when they buy it than when they sell it, the short seller has made a profit. Short sellers lose money if the asset they short goes up in value before they buy it. Since the price of an asset can increase without a cap, a short seller has an unlimited amount of potential losses. Conversely, most assets held in a long position cannot be worth less than $0.