What is "Selling Short"?

Short selling involves selling borrowed securities in the hope or expectation of replacing them at a lower cost in the future. Short sales may be used conservatively, as when you try to lock in the takeover premium in a stock-for-stock merger. Short sales may also be used more aggressively to try to profit from an expected decline in the price of a specific security. Although each stock fund is allowed to sell securities short, most funds have historically limited themselves to the more conservative uses of short sales.
Is there ever a time to use this aggressively? Why would you?

Bookmark/Search this post with:

| | | |