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How to Short a Stock: The Basics of Shorting

If you've ever wanted to make money from a company's misfortune, selling stocks short can be a profitable -- though risky -- way to invest.

By Matthew Frankel, CFP – Updated Nov 11, 2024 at 9:47PM

Key Points

  • Short selling lets investors profit from declining stock prices by borrowing and selling shares, then repurchasing them at a lower cost.
  • If the stock price rises, short sellers must buy back shares at a higher price, risking substantial losses.
  • Short selling provides market liquidity and prevents overpricing, but involves complex risks not all investors grasp.
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