What is short in stock market parlance?

Answer 1

Short selling or "shorting" is the practice of selling a financial instrument that the seller does not own at the time of the sale. Short selling is done with the intent of later purchasing the financial instrument at a lower price. Short-sellers attempt to profit from an expected decline in the price of a financial instrument.

Typically, the short-seller will "borrow" or "rent" the securities to be sold, and later repurchase identical securities for return to the lender. If the security price falls, the short-seller profits from having sold the borrowed securities for more than he later pays for them. However, if the security price rises, the short seller loses by having sold them for less than the price at which he later has to buy them. The practice is risky in that prices may rise without bound, even beyond the net worth of the short seller. The act of repurchasing a shorted security is known as "closing" a position or "covering".

Answer 2

Short selling is a little confusing.

Basically, it represents a sale of stock you don't actually own... yet. You borrow the shares from someone else with the understanding you will return them later, and then you sell them.

So, for example, say I own 100 shares of XYZ stock. It's currently selling for 50 dollars a share. You ask to borrow them, promising to return them in, say, a month. You then immediately sell them, collecting $5000 (before I let you borrow them, I've probably required you to give me collateral worth, usually, slightly more than the stocks were, so if you don't return them, I'm not just out $5000 worth of stock).

At the end of the month, you're going to have to give me 100 shares of XYZ stock. If the price drops to 40 dollars a share during that month, you can buy them for $4000, which means you make $1000 (minus whatever I charge you to borrow them). If the price goes up instead to say $60, then you still have to return 100 shares to me, but replacing them will now cost you $6000 instead so you lose $1000 (plus what I charged you to borrow them).

Short selling is essentially a bet that a stock is currently overvalued and is going to drop in price.

Answer:

Short selling is the selling of stock that one does not own. A short seller sells a stock that he believes will fall in value. He does not own the stock instead he borrows it from someone who already owns it. Later, he buys back the same amount of stock and returns it to close out the loan. If the stock has fallen in price since he sold short, he can buy back the stock for less than he sold it for. The difference between these amounts is his profit.

Investors can profit by short selling stocks that are likely to fall sharply when the market declines. Short sales are therefore very useful to protect an investors` portfolio from an economic downturn. Short selling also reduces the volatility in the portfolio's returns and helps protect the value of the portfolio when prices are falling.

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