Short selling is betting that a stock will go down. So, what you are doing is
selling shares you do not own and
buying them back after the stock drops.
http://www.stocktradingtogo.com/2006...ort-explained/
So, lets take a simple example. Stock XYZ is trading at $10 a share, and you think it is going to fall to $9, so you decide to short 100 shares. Well, when you click that "short market" button and process the trade, your brokerage house at this time gives you $1000 ($10 x 100 shares). On your portfolio overview, it then shows "-100" as your position. You
sold 100 shares that you did not own, and your brokerage house paid you for them. Now, let's say the stock drops to $9 a share like you predict, and you decide to "cover" or
buy back the 100 shares. You then go and hit the "Cover" button and cover your shares at $9; at this time you give $900 back to the brokerage house ($9 x 100 shares), and you keep the difference. In the end, you just made $100 or 10% on your money!
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