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Here is a more formal definition: |
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Short Sale: The sale of shares of a security that the seller does not own. Such sales are made in anticipation of a decline in the price of the security. They enable the seller to cover the sale with a purchase at a later date, at a lower price, and thus at a profit because delivery of the current sale is in the future. |
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For those of you who are not yet short sellers: What is the difference between these two approaches to the market? |
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Does the "order" of the transaction matter? Of course not. The answer is obvious. The math doesn't change so the order of the transaction is immaterial. |
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Short selling is just the reverse of "going long," buying first and selling later. Many new traders get confused by this whole concept, but it is really so simple. You are trying to accomplish the same thing, buy |
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Figure 10.5
Sample Short Sale |
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