Short position

An investor who will profit from a fall in the price of a security without owning it has a short position in it.

Short selling is a way of profiting from a decline in a price by selling a security without owning it. This may be done by borrowing a holding of the security.

Investors may use derivatives rather than underlying securities to take a short position: for example, by buying put options. A holding of a put option is a short position in its underlying.

Short positions may form part of many different strategies. Some may aim to profit from an expected decline in a market, others may use short positions to hedge a downside risk rather than profit from it. A particular example of the latter are market neutral porfolios that are completely hedged against market movements.

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