What Is Short Selling?
Short selling is borrowing shares and selling them, with the plan of buying them back later at a lower price and returning them to the lender. The short seller profits if the price falls and loses if it rises. Because a price can rise without limit, potential losses on a short position are theoretically unlimited.
Example
Shorting 100 shares at 50 and buying back at 40 earns 1,000 before costs; buying back at 70 loses 2,000.
Costs and Risks
Short sellers pay interest to borrow shares, and a rapid rise in price can force many to buy at once, known as a short squeeze.
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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.