Short selling is an investment strategy that may allow investors to profit from a decline in a stock’s price.
When you short a stock, you borrow shares and sell them at the current market price. If the stock’s price declines, you can buy the shares back at the lower price and return them to the lender. Your profit or loss is the difference between the price at which you sold the shares and the price at which you repurchased them, minus fees and interest.
If the stock’s price increases instead, buying the shares back will cost more than the proceeds from the sale, resulting in a loss.
Short selling involves substantial risk and is more complex than traditional stock investing. Because a stock’s price can rise indefinitely, losses from short selling can be unlimited.
Short selling is not available to all investors. To short stocks on Public, you must be approved for margin trading.