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Good to know
Short Selling
Is a leveraging strategy that lets you take advantage of market declines?
If you think the price of a security is going to drop, you can borrow shares of that security from your investment dealer and sell them at the current high price.
If the share price falls, you can purchase the shares at the lower price on the open market and "return" the borrowed shares to your dealer.
You profit by selling shares at the higher price, and buying at the lower price.
What are the Risks of Short Selling?
You are speculating that the security value will fall, so you can lose money if the value rises instead. Margin requirements for short selling are much higher than typical margin borrowing, because of the risk of using borrowed shares.
When borrowing on margin, understand what your obligations are, and ensure that you can meet those obligations. If you cannot pay the interest or meet a margin call on your account, the investment dealer has the right to sell your securities, even at a loss.
It is not a good idea to use short selling unless your cash flow can easily cover potential losses.
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