Short Sale

A short sale is a financial strategy where an investor borrows shares of a stock and sells them at the current market price, hoping to buy them back later at a lower price. If the stock price falls, the investor can buy the shares back at that lower price, return them to the lender, and profit from the difference. However, if the stock price rises instead, the investor faces potentially unlimited losses, as they must still buy back the shares at the higher price. Thus, short selling carries significant risks and requires careful market analysis.