SELLS SHORT Meaning and
Definition
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The phrase "sells short" typically refers to a financial transaction or investment strategy commonly used in stock markets. It entails the sale of a security, such as a stock or bond, that the seller does not currently own but believes will decline in value. By selling short, an individual or entity aims to profit from the decline in price of the security.
When a person sells short, they borrow the security from a broker or another market participant, with the promise to return it later. The seller immediately sells the borrowed security at the current market price, hoping that its value will drop over time. If the price indeed falls as anticipated, the seller can repurchase the security at a lower price and return it to the lender, thus making a profit from the difference between the initial sale price and the repurchase price. On the other hand, if the price rises, the seller incurs a loss as they must buy back the security at a higher price to return it.
"Selling short" is often viewed as a speculative investment technique, as it involves anticipating a decline in value. It is commonly employed by professional investors, hedge funds, or traders who engage in active market speculation. However, due to its risk and potential for significant losses, selling short is regulated and may require specific approvals or margin requirements from the market authorities or brokers.
Common Misspellings for SELLS SHORT
- sel short
- sell short
- cell short
- aells short
- zells short
- xells short
- dells short
- eells short
- wells short
- swlls short
- sslls short
- sdlls short
- srlls short
- s4lls short
- s3lls short
- sekls short
- sepls short
- seols short
- selks short
- selps short
Etymology of SELLS SHORT
The phrase "sells short" has its roots in financial markets and specifically in the practice of short selling. The term "short selling" can be traced back to the late 18th century. The verb "sell" refers to the act of exchanging goods or services for money, while the adjective "short" denotes a deficit or shortage in a particular asset.
In the context of trading, short selling involves selling a security (such as stocks or bonds) that the seller does not currently own, with the intention of buying it back at a later time at a lower price. This means that the investor is essentially betting on the price of the security decreasing. If the price does drop, they can repurchase the security at a lower cost and profit from the price difference. The expression "sells short" emerged as a way to describe this specific trading strategy.
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