Short Selling
Market Microstructure glossary · Market Microstructure Fundamentals
Definition
Selling a security that the seller does not own, typically by borrowing the shares, with the intention of buying them back later at a lower price.
Short Selling in plain English
Normally you make money on a stock by buying low and selling high — but short selling flips the order so you can profit when a stock FALLS. You borrow shares you don't own (paying a small fee to the lender), sell them today at, say, $50, and hope to buy them back later at $30 to return to the lender, pocketing the $20 difference. It's like borrowing a friend's concert ticket, selling it now while prices are hot, and buying a cheaper one later to give back — except the danger is real: if the stock RISES instead, you must buy it back at a higher price and take the loss, and there's no limit to how high a price can climb.
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