Hi, What is the meaning of "short" in the stock market?

Question

Hi, What is the meaning of "short" in the stock market? I know "long" means you hold a stock and wait for it to increase for gains, but I believe "short" means you want it to go the other way, is it to do with leverage? I'm not sure exactly.

Answer 1

"Short" is not having in possession at the time of sale the commodity or security one is selling in anticipation of a decline in price.

Answer 2

Yes - short means you 'buy' stock in the hope that it falls in value; but are penalised if it goes up - so the opposite of a normal trade.

This is usually an option when buying from someone else's stock - they are offsetting potential losses against people who are gambling the stock will fall. So it's  secondary effect of "normal" trading.

Although it sounds attractive (my stocks always seem to fall!) it has just as many risks, so steer clear unless you can afford to lose what you invest.

Answer 3

Short selling is the act of borrowing shares of stocks in hopes of it going down. I only recommendd this for the advanced trader though because the usual trend of any stock is to go up. You should maybe get help from a profesional or someone experienced if you plan on short selling.

Answer 4

Shorting a stock means that you are turning the adage "Buy low, sell high" on its head.  With shorting a stock, you are anticipating a downward move in the stock in the near future.  Here's the basic idea:

Lets say that a stock is trading at 25.00, and you think in the near future it'll go down to 20.00.  So you place an order to "short" 100 shares of the stock at the price of 25.00.  Now when you shorted, you borrowed 100 shares from someone else(no need to worry who you borrowed it from, the broker's back office usually handles this stuff).  So now in you're short account, there is a balance of $2,500(100shares x $25). Sooner or later, you're going to have to "buy to cover" those 100 shares you borrowed.  You're hoping to do this at a lower price.  Let's say you're right and it goes down to 20.00, and you buy to cover the 100 shares you shorted:that's costing you $2000.  Now remember, we sold the 100 shares at 2500, but it only costs us 2000 to cover what we borrowed.  So the $500 difference is what you keep.  That being said, here are some of the risks involved.  Let's say the stock shoots up to $40 after we sell it short at $25.  Now it's going to cost us $4000 to buy back something we sold for only $2500(a $1500 loss).  Technically, our loss could be unlimited since the stock could keep going higher and higher.  Also, remember we said earlier that we had to borrow the shares from someone else.  If the person that actually owns those shoares wants to sell them, then there could be a chance that we could be FORCED to cover our short position AT ANY TIME even if we are making a profit or taking a loss.  I know it's long, but I hope this helps.  

Answer 5

shorting stock means you are borrowing shares (not 'buying' shares as michael from UK said) and selling them immediately in teh hopes that the stock goes down, at which time you can buy the shares back to repay the shares your borrowed at a cheaper price.

you can also go short in futures positions, which is simply like putting a sell order in.  if you take a long position in a futures contract, the only way to get out of the position is to go short, or let the contract expire.