Trading Short
 |
 |
 |
 |
In finance, a short position makes a profit when the value of the underlying asset goes down.
A short position in a security, such as a stock or option, or equivalently to be short a security, means the holder of the position has sold a security that he does not own, with the intention to buy it back at a later time at a lower price. The short seller owes his broker and must repay the shortage when he covers his position. Technically, the broker usually in turn has borrowed the shares from some other investor who is holding his shares long. The broker itself seldom actually purchases the shares to loan to the short seller.
Similarly, a short position in a futures contract like an option, or to be short a futures contract, means the holder of the position has the right, but not the obligation to sell the underlying asset at a later date. In options trading this would be a "Put" or put option.
Ricky Schmidt
January 10, 2007
|