What is selling stock short?

Selling stock short is an investment strategy in which the investor is anticipating a decline in the price of a security. The investor borrows shares from another investor or institution and immediately sells the shares in the market. The investor will then have the obligation to return the shares at some point in the future. Should the price of the stock decline, the investor will have an unrealized profit at which point they can buy the shares back in the market to realize this profit and return these shares to where they were borrowed. If the stock price increases, the investor will have an unrealized loss and will realize this loss by purchasing the stock back in the market and returning these shares. Please note, short selling can only be done in a margin account. Click here for our margin FAQs.