Short Selling or "shorting" is the practice of selling a financial instrument that the seller does not own at the time of the sale. Short selling is done with intent of later purchasing the financial instrument at a lower price. Short-sellers attempt to profit from an expected decline in the price of a financial instrument. Short selling or "going short" is contrasted with the more conventional practice of "going long", which typically occurs when a financial instrument is purchased with the expectation that its price will rise. Thus, being "long" is just a way of saying that you own a positive number of the securities; being "short" is just a way of saying that you own a negative number of the securities.
Typically, the short-seller will "borrow" the securities to be sold, and later repurchase identical securities for return to the lender. If the security price falls, the short-seller profits from having sold the borrowed securities for more than he later pays for them. However, if the security price rises, the short seller loses by having sold them for less than the price at which he later has to buy them. The practice is risky in that prices may rise without bound, even beyond the net worth of the short seller. The act of repurchasing a shorted security is known as closing a position.
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