Short selling
Betting that a stock will fall instead of rise.
To go short is to sell something you do not own. You borrow the shares from someone who holds them, sell them today, and promise to return the same number of shares later. If the price falls, you buy them back cheaper, return them, and keep the difference. If the price rises, you buy them back dearer, and the loss is yours.
Two things make shorting different from buying. The loss has no ceiling: a stock can only fall to zero, but it can rise without limit. And the position is rented, not owned: someone lent you the shares, charges you for it, and can ask for them back.
That is why short selling appears so often in the pitches we test: the same mechanics that make it dangerous make it easy to sell as a story.
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Where this word comes up
First needed in the log entry H-059 · Testing the shorting premium: what a rebalancing bug taught us.
From the same entry: Borrow fee, Crowded shorts, Decile, Delisted, Long-short portfolio, Rebalance, Recall, Short interest percentage, Squeeze, t statistic, Universe.