Er, what is short-selling?
Where do you see this?
Mainly in financial news stories, especially in stock market reports.
What does it mean?
Short-selling involves selling securities the investor does not own in the hope of buying them back later at a lower price.
It is in stark contrast to the more common investment strategy in which an investor "go long" - buying a stock or bond in the hope that the price will rise.
For example, an investor may want to sell short 1,000 SingTel shares believing that they are overpriced and that the price will drop.
The investor's broker will borrow the shares from someone who owns them, with the promise that the investor will return them later. The investor immediately sells the borrowed shares at the current market price. If the price of the shares drops, the investor "covers the short position" by buying back the shares, and his broker returns them to the lender. The profit is the difference between the price at which the stock was sold and the cost to buy it back, minus commissions and expenses for borrowing the stock.
Why is it important?
It enables investors to profit from an expected plunge in a stock's price.
However, this is an advanced trading strategy involving many risks and pitfalls.
Novice investors are urged to avoid short-selling. This is because if the price of the stock surges, the potential losses could be huge.
So you want to use the term. Just say...
I made a tidy profit yesterday by short-selling this stock in anticipation that its price would fall.
Invest, The Sunday Times, November 17, 2013, Pg 49