Short sale

• The sale of securities not owned by the seller in the expectation that the price of these securities will fall or as part of an arbitrage. A short sale must eventually be covered by a purchase of the securities sold. Short seller borrow the asset (not owned), sells it and the later purchases the asset (hopefully at a lower price) and returns to the original party that the asset was borrowed from. One would do a short sale if you expect the price of the asset to fall and you do not own the asset to begin with.

• Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.


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