Short Selling
Selling borrowed securities aiming to buy them back later at a lower price.
Detailed Description
Short Selling
What is the main goal of short selling?
The main goal of short selling is to profit from the decline in the price of a stock or asset.
What happens if the stock price rises after a short sale?
If the stock price rises, the investor faces potential losses and must buy back the shares at a higher price.
What is a 'short squeeze'?
A short squeeze occurs when a rapid increase in stock price forces short sellers to buy back shares, driving the price even higher.
How are profits from short selling taxed?
Profits from short selling are typically taxed as short-term capital gains, subject to higher tax rates.
What market conditions favor short selling?
Bear markets and stocks with excessive valuations or negative news create favorable conditions for short selling.