Er, what is
short-selling?
Where do you see
this?
Mainly in financial news stories, especially in stock market
reports.
What does it mean?
Short-selling involves selling securities the investor does not
own in the hope of buying them back later at a lower price.
It is in stark contrast to the more common
investment strategy in which an investor "go long" - buying a stock
or bond in the hope that the price will rise.
For example, an investor may want to sell short
1,000 SingTel shares believing that they are overpriced and that
the price will drop.
The investor's broker will borrow the shares from
someone who owns them, with the promise that the investor will
return them later. The investor immediately sells the borrowed
shares at the current market price. If the price of the shares
drops, the investor "covers the short position" by buying back the
shares, and his broker returns them to the lender. The profit is
the difference between the price at which the stock was sold and
the cost to buy it back, minus commissions and expenses for
borrowing the stock.
Why is it important?
It enables investors to profit from an expected plunge in a
stock's price.
However, this is an advanced trading strategy
involving many risks and pitfalls.
Novice investors are urged to avoid short-selling.
This is because if the price of the stock surges, the potential
losses could be huge.
So you want to use the term. Just say...
I made a tidy profit yesterday by short-selling this stock in
anticipation that its price would fall.
Invest, The Sunday Times, November 17, 2013, Pg 49