Short Selling Explained

What is short selling, and why would someone want to sell a security that they do not own?

To state it in the simplest form, short selling is the sale of a security that you think will go down in price. When you own a stock, you are “long” on that stock because you think the price will go up. On the contrary, you are “short” on a stock when you think it will go down from its current price. However, short selling comes with its own set of risks because there is no limit to the amount of money you can lose if the stock continues to go up. Host Lou Scatigna, CFP® expands further on the concept of short selling in this segment from The Financial Physician.