| Short Selling or “shorting” is the selling of a security that is not owned by the seller; this involves a process where a broker sells borrowed securities. The buying and selling of stocks occur with a stock broker or directly from the company. Brokers are most commonly used, as they serve as an intermediary between the investor and the seller and often charge a fee for their services.
The short seller hopes to profit from a decline in the price of the assets between the sale and the repurchase, as the seller will pay less to buy the assets than it received on selling them. The short seller will incur a loss if the price of the assets rises (as it will have to buy them at a higher price than it sold them), and there is no theoretical limit to the loss that can be incurred by a short seller. |