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Short Position
A position that profits if an asset's price decreases.
A short position is one that profits if the price of an asset decreases. It typically involves borrowing an asset to sell it, with the intent to buy it back later at a lower price.
Short positions carry distinct risks: because there's theoretically no upper limit to how high a price can rise, potential losses on a short position can be larger than on an equivalent long position.
Examples
- A trader who expects a price to fall might open a short position to try to profit from that decline.
- Short positions are generally considered more complex and riskier than simply buying and holding.