Short Selling: What Does It Mean?

Short selling is an investment strategy where a trader borrows shares of a stock they believe will decline in value, sells them immediately, then hopes to buy them back later at a lower price — returning the borrowed shares and pocketing the difference. For example, shorting 100 shares at $50 and buying them back at $30 yields a $2,000 profit (minus fees). Short selling carries theoretically unlimited risk since a stock's price can rise without bound. It's primarily used by sophisticated investors and hedge funds to profit from anticipated declines or to hedge long positions.