What is short sale of stocks?
The short sale of stocks may also be referred to as selling short or taking a short position. Short selling is an advanced stock trading technique and an investor should be aware of the rules and possible outcomes before attempting this type of trade.IdentificationA stock short sale is when a trader sells shares of a stock she does not own with the plan to buy them back at a lower price. Short selling is profitable if the sold stock falls in value.FunctionTo sell a stock short, the trader must first borrow the shares from his broker, then place the short trade. The assumption is that the broker will get the shares from other accounts of the brokerage. The trader is charged interest on the value of the shares sold short and must pay any dividends declared by the stock.PotentialStock short selling is a way to profit if the overall market or a single stock is going down in value. Aggressive short selling by traders can continue to drive a stock price even lower. To realize the profit, the
