What does shorting a stock mean?

Shorting a stock means betting that its price will decrease, allowing the investor to profit from the decline. This involves borrowing shares of the stock from a broker and selling them at the current market price. The investor must eventually buy back the shares to return them to the broker, ideally at a lower price to make a profit.

Should you short a stock?

Since shorting involves borrowing shares of stock you don't own and selling them, a decline in the share price will let you buy back the shares with less money than you originally received when you sold them. However, there are some other situations in which shorting a stock can be useful.

How do you short a stock?

So, you decide to short the stock by borrowing 10 shares from your brokerage and selling them for a total of $1,000. If the stock proceeds to go down to $90, you can buy those shares back for $900, return them to your broker, and keep the $100 profit. At first glance, you might think that short-selling would be just as common as owning stock.