Short selling is the practice of borrowing shares to sell now, with the obligation to buy them back later — profiting if the price falls. Mechanically: borrow 100 shares of XYZ at $50 = $5,000 received; if XYZ falls to $40, buy back for $4,000, return shares, keep $1,000 profit. Losses are theoretically unlimited (a stock can rise infinitely). Short squeezes (like GameStop January 2021) can force shorts to cover at any price. Most retail investors should avoid short selling — the structural odds favor longs (market trends up), borrowing costs erode returns, and tail risk is catastrophic.
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Short Selling
August 22, 2026 · Aditya Gupta
Investing
Related terms
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