Definition Short Selling. Description.
Short Selling is to sell commodities, currencies or
securities that the seller does not own, typically in the speculative expectation
that the prices will fall. The seller will then be able to cover the sale
by buying the security back at a lower price. The profit would be the difference
between the initial selling price and the subsequent purchase price.
This is a high-risk strategy, and related losses (or gains)
can be substantial. Compare: Put Option
The act of buying back the shares which were sold
short is called Short Covering.
A "Short and Distort" scam involves short selling a
stock while smearing a company with false rumors to drive the stock's price
down. Short-and-distort tactics work best with smaller companies whose stock
prices are more volatile. Untrue or exaggerated negative information (creating
artificial selling motivation) is disseminated to allow fraudulent profits
to occur. Compare: Whisper Number
Short Selling Special Interest Group
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