short position

A type of security trade where the investor sells a security with the desire for its price to fall. A short position is taken by borrowing shares from a broker and selling them at the current market price. This creates an open position with the broker. If the stock’s price drops, the short seller can buy the shares back for less than the total price they sold the shares for earlier, and the excess cash is their profit. Short stock positions are typically only given to accredited investors, and the investor is usually required to place a margin deposit or collateral with the broker in exchange for the loaned shares.