You borrow $100 and sell it for $5,000. Short selling occurs when the price drops quickly to $25 per share, at which point you acquire 100 shares to replace those borrowed, netting $2,500.
When you anticipate that a security's price will fall, you should consider using the short-selling method. To find out how to employ this tactic, keep reading about short sellers. When you want to sell short, you follow the typical stock trading strategy of "buy low and sell high," but you do it the other way around.
You borrow shares of security from a broker and sell them in a short sale if you don't already own them. When you short a position through a short sale, you eventually need to buy-to-cover to close the position.
This requires you to buy back the shares you originally borrowed from the broker and return them to him or her. If you buy the shares back from the short seller at a cheaper cost, you can benefit from the short sale.
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