Glossary
Short Selling
Selling borrowed shares with a view to repurchase later at a lower price.
Short selling is borrowing shares from a broker, selling them at the current market price, and later buying them back to return to the lender — profiting if the price falls in between, losing if it rises.
Losses are theoretically unlimited because a share price can rise indefinitely, while gains are capped at 100% (price falling to zero). Short sellers also pay borrowing fees and any dividends due during the borrow period.
Short interest as a percentage of float is a watched sentiment indicator. Heavily shorted stocks can experience violent short squeezes when buying pressure forces shorts to cover at rapidly rising prices.