November 16, 2013 5:21pm
The Tell in any “game” is a subtle but detectable change in a player’s behavior that gives clues to that player’s assessment of an equity “position” such as … short selling.
A short sale profits from a decrease in the price of a security, borrowing<renting> the security with the expectation it will be cheaper to repurchase in the future. When the seller decides that the time is right expectation (or when the lender recalls the securities), the seller buys equivalent securities and returns them to the lender. The process relies on the fact that the securities (or the other assets being sold short) are fungible; the term "borrowing".
To be explicit, short selling (going short) is the practice of selling securities that are not currently owned and subsequently repurchasing them ("covering"). In the event of an interim price decline, the short seller will profit, since the cost of (re)purchase will be less than the proceeds which were received upon the initial (short) sale. Conversely, the short position will be closed out at a loss in the event that the price of a shorted instrument should rise prior to repurchase. Short Position presents the expectation that the asset will fall in value and is the opposite of a "long (or long position).
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