Business Definition for: going short
going short
selling a stock or commodity that the seller does not have. An investor who goes short borrows stock from his or her broker, hoping to purchase other shares of it at a lower price. The investor will then replace the borrowed stock with the lower priced stock and keep the difference as profit.
See also
selling short
,
going long
going short
hedging strategy whereby a bank obtains either a
forward commitment
or a
standby commitment
from a
secondary market
buyer to purchase loans before the loans actually are booked. By getting a commitment first, the lender is able to lock in a mortgage rate if interest rates are expected to rise or fall.
In the securities industry, selling a security not actually owned by the investor-a
short sale
-anticipating that the open position created by the sale can be closed when the security is purchased later at a lower price.
going short
Related Terms:
selling securities (or commodities futures contracts) not owned by the seller. The investor (seller) earns a profit when the market price of the security declines, and loses money when the purchase price is higher than the original selling price. To make a short sale, the broker borrows stock and loans it to the investor. Later on, hopefully when the market price is lower, the investor buys the shares to repay the lending broker. Assume an investor sells short 50 shares of stock having a market price of $25, for a total of $1250. The broker borrows the shares and holds onto the proceeds of the short sale to secure the loan and satisfy margin requirements. Later on, the investor buys the stock at $20 a share, repays the 50 shares, earning a per share profit of $5, or a total of $250.
Investors "sell short against the box" when they sell short shares they actually own ( not borrowed shares). Short sales against the box may occur so that a loss is minimized or the tax consequences of a long sale may be postponed to a subsequent tax year.
purchasing a stock, bond, or commodity for investment or speculation. Such a security purchase is known as a long position. The opposite of going long is going short, when an investor sells a security he does not own and thereby creates a short position.
purchasing a stock, bond, or commodity for investment or speculation. Such a security purchase is known as a long position. The opposite of going long is going short, when an investor sells a security he does not own and thereby creates a short position.
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
