Short Sale

[shawrt seyl]

What is the definition of Short Sale?

A financial transaction where an investor sells an asset they do not currently own, typically securities, with the intention of repurchasing them later at a lower price. The investor borrows the asset to make the sale and later buys it back to return it to the lender.

Using Short Sale in an Example

An investor believes that the stock price of Company X, currently at $100 per share, will decline. They execute a short sale by borrowing 100 shares and selling them at the current market price. If the price drops to $80, the investor can buy back the 100 shares at this lower price, return the shares to the lender, and make a profit of $20 per share minus any fees.

Using Short Sale in a sentence

During the meeting, the trader explained that they executed a short sale on several tech stocks, anticipating a decline in their market values over the next few months.

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