Short Sale

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Short Sale

A method of gaining profit from an anticipated decline in the price of a stock.

An individual who sells short sells either stock or Securities that he or she does not own and that are not immediately ready for delivery. Generally the seller borrows the shares needed to cover the sale from a Broker and then delivers these shares to the buyer. The seller deposits an amount that is equal to the value of the borrowed shares with the broker. This amount stays on deposit with the broker until the stock is returned. The seller must ultimately return the same number of shares of the same stock to the broker, and the transaction is not fully executed until the stock is returned. The broker lending the stock is entitled to all the benefits he or she would have received if the stock had not been lent. When a dividend is paid, then the seller-borrower is required to pay the broker-lender an amount equal to the dividend.

References in periodicals archive ?
Before we talk about short-selling research organisations, let's start with the term 'short-selling'.
However, short-selling is not applicable to all securities assets.
The poor quality of short sell Research -- How short-selling organizations Stage the Attack
We found that there was a decline in relative short-selling activity on the days of a 10 percent decline even before the approval of Rule 201.
Next, we split the short-selling volume and trading volume during the day into the periods before and after the 10 percent decline.
As a result, short-selling regulations have been in flux worldwide.
The exchange has also outlined a flexible framework for suspension of naked short-selling activity which can be implemented for the whole market, individual stocks or even specific functions conducted by a market participant, i.
Previous short-selling rules were so restrictive as to limit activity to a minimum, according to Ziebec, who sees the new framework as fundamental to the exchange's growth.
Mr Fagg said short-selling had become a problem because what was originally a fairly rare practice had been taken up and used too aggressively by too many investors.
He added it was unfair to blame to results of short-selling entirely on investors, as every deal also needed a willing seller.