Short Selling |
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In a sense, short selling stocks means to own a negative amount of stocks.
The hope is that the price falls and it is possible to buy whatever was sold at a lower price, deliver it to the buyer at the previous higher price and make a profit. This is termed 'covering your position'.
In order to sell stocks short, one must borrow it from someone else, usually a stockbroker. The lender will charge a fee for this service of course. Generally this is in the form of "margin interest" which the short seller pays continuously to the stockbroker until he has covered his position. This decreases the profit potential of short selling, especially if the stock is held short for a long time.
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