ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

What is "Shorting a Stock"?

Updated on June 10, 2013

Sell High Buy Low

Shorting a Stock

For me, one of the most difficult concepts to understand was "Shorting" a stock. This type of trading entails Selling a stock before you own it. Think of it this way. Buy low sell high....but in reverse. When shorting a stock you are first Selling it High and buying it back at a lower price. To do this you are actually borrowing the stock from your broker then returning it to him. You "Short" it with the intention of it going lower in price. You make the difference between the sell price and the buy price. For example You sell 100 shares of XYZ at $10.00 per share then when it goes down you buy it back at the lower price, let's say $9.00. The difference is $1.00 X100 shares = $100 minus fees and commission. On the same token if you short 100 shares of XYZ at $10.00 and it goes up to $11.00 and you buy it back then you lose $1.00 X 100 share at a loss of $100 plus fees and commission.


Borrowing the Stock from your Broker

When Short selling a stock you must first borrow it from your broker then return it to him when closing the trade. This sounds more complicated that it is. With today's technology it's all done from the comfort of your own home with the push of a button on your computer.

I'm a Day Trader and Shorting a stock is as easy as "Going Long". Going Long means you buy the stock with the intention of it going up then sell it at a higher price.

Going Short means you first Sell the stock with the intention of it going down then you buy it back at the lower price, closing out your position.

Think of it like this:

You Sell 100 shares of a stock making you -100 shares.

Then you buy back 100 shares making you flat or 0.

ESRX Short Trade

Cover

To "Cover" your trade means to close it out. If you are Long 100 shares of a stock then you would Sell 100 shares to "Cover" your trade, closing out your position.

If you are Short 100 shares of a stock you would "Cover" your trade meaning Buy 100 shares to close out the position.

Example of a Short trade

Here is a video of a Short trade I took back in June of 2012. This is one that worked out nicely. They don't all work out this smooth and I must say that I do NOT recommend you trying this with out proper training, and NEVER risk money you can not afford to lose.

For a full screen video go directly to YouTube.

http://www.youtube.com/watch?feature=player_embedded&v=h2FEwaUztf0

HAL Short trade

Do you understand "Shorting" a stock?

Was this Hub helpful in explaining Short Selling a stock?

See results
working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://corp.maven.io/privacy-policy

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)