Short (or Short Position)

AAA

DEFINITION of 'Short (or Short Position)'

1. The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.

2. In the context of options, it is the sale (also known as "writing") of an options contract.

Opposite of "long (or long position)."

INVESTOPEDIA EXPLAINS 'Short (or Short Position)'

1. For example, an investor who borrows shares of stock from a broker and sells them on the open market is said to have a short position in the stock. The investor must eventually return the borrowed stock by buying it back from the open market. If the stock falls in price, the investor buys it for less than he or she sold it, thus making a profit.

2. For example, selling a call (or put) options contract to a buyer entitles the buyer the right, not the obligation to buy from (or sell to) you a specific commodity or asset for a specified amount at a specified date.

Learn more about this dynamic strategy - Read When To Short A Stock.

VIDEO

Loading the player...
RELATED TERMS
  1. Short Covering

    Buying back borrowed securities in order to close an open short ...
  2. Weak Shorts

    Traders or investors who hold a short position in a stock or ...
  3. Short Squeeze

    A situation in which a heavily shorted stock or commodity moves ...
  4. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  5. Short Interest

    The quantity of stock shares that investors have sold short but ...
  6. Sell To Close

    In options trading, an order to sell an option that you own and ...
RELATED FAQS
  1. How does holding period return yield differ between short and long positions in the ...

    Holding period return yield differs between short and long positions in the market because there are greater costs and risks ... Read Full Answer >>
  2. What's the difference between insider trading and insider information?

    Insider information is the knowledge of nonpublic material about a publicly traded company that may affect the stock's price. ... Read Full Answer >>
  3. How can the exponential moving average be used in swing trading?

    The exponential moving average (EMA) is a variation of the simple moving average that places more emphasis on the latest ... Read Full Answer >>
  4. Is going long considered to be less risky than going short?

    Two positions an investor can be in are long or short. A long position is created when an investor buys a security, such ... Read Full Answer >>
  5. What is the difference between a short position and a short sale?

    A short position and a short sale are very similar concepts; for this reason, they are often collectively referred to as ... Read Full Answer >>
  6. How do I use Mass Index for creating a forex trading strategy?

    The mass index creates possible trade signals through the relationship between current trading ranges and historical trading ... Read Full Answer >>
  7. How do traders identify descending triangle patterns?

    Descending triangles are formed with two trendlines drawn on a security or index's price chart, one as a resistance line ... Read Full Answer >>
  8. What does a Dead Cat Bounce pattern tells traders about a stock?

    A dead cat bounce is a technical trading pattern that signals to traders the continuation of a downtrend, that a stock’s ... Read Full Answer >>
  9. How do investors and traders use the Commodity Channel Index - CCI?

    The commodity channel index (CCI) is a technical momentum oscillator used by traders to spot overbought and oversold positions ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    When To Short A Stock

    Learn how to make money off failing shares.
  2. Active Trading Fundamentals

    The Short Squeeze Method

    The short squeezed strategy can be risky - but also very rewarding - for those who master it.
  3. Fundamental Analysis

    Short Sales For Market Downturns

    This strategy can help in market downturns, but it's not for inexperienced traders.
  4. Mutual Funds & ETFs

    Shorting ETFs: Profit Or Peril?

    Although more detail and attention may be needed, ETFs can be shorted - and at a great profit.
  5. Active Trading Fundamentals

    Short Interest: What It Tells Us

    This figure can be a real eye-opener about the market sentiment surrounding a given stock.
  6. Active Trading Fundamentals

    The Short And Distort: Stock Manipulation In A Bear Market

    High-quality stock reports needn't be confused with stock manipulators' dramatic claims.
  7. Active Trading Fundamentals

    Finding Short Candidates With Technical Analysis

    Learn how to distinguish tops and bottoms in the equity market when short selling.
  8. Options & Futures

    Questioning The Virtue Of A Short Sale

    This controversial strategy is blamed for making and breaking markets. Read on to learn more.
  9. Active Trading Fundamentals

    Short Selling Tutorial

    Want to profit on declining stocks? This trading strategy does just that.
  10. Investing

    What More Volatility Means For Momentum Stocks

    One byproduct of the recent tick higher in bond yields: a meaningful rise in volatility for both stocks and bonds.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center