The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines, Expanded Second Edition

Question 87—Shorting a Stock

Answer 2 Selling a borrowed stock.

There are many reasons to sell a stock—you may think that it is overvalued or about to decline. While these reasons can apply to any stock, there is only one way to sell a stock short—by borrowing its shares. People who sell short reverse the standard process of buying first and selling later. Shorts begin by selling borrowed shares in order to buy them back later. This allows them to profit from stock declines rather than rallies.