Angie · learn

Short selling

Borrowing shares, selling them, and buying them back later. The gain is capped at 100 percent and the loss is not capped at all.

Updated 2026-09-05

Short selling is borrowing shares, selling them, and buying them back later to return. You profit if the price falls, and you are paying a borrow fee the entire time you hold.

The risk is structurally different from being long, and it is the reason short selling is not simply the mirror image. A long position can lose 100 percent. A short position can lose several hundred percent, because the price above you is unbounded, and the position grows against you as it goes wrong rather than shrinking.

Shorts can also be forced closed. If the lender recalls the shares, or margin requirements rise as the position moves against you, you buy back at the worst possible moment alongside everyone else in the same position. That is a squeeze, and it is why being right about the company is not sufficient.

See also

  • Margin — Borrowing from your broker to buy more than your cash allows. It multiplies gains, losses and the chance of being forced to sell at the worst moment.
  • Volatility — How much a price moves around, usually stated as annualised standard deviation. It is a measure of variability, not of danger, though the two often coincide.

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Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.

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