Shorting, also known as Short Selling or going short, is a trading strategy where an investor borrows shares of a stock, commodity or other asset, and then sells them in the market with the expectation that the price will decrease. The investor hopes to buy the shares back at a lower price in the future and return them to the lender, pocketing the difference as profit.For example, an investor believes that the price of XYZ stock is going to decrease in the future, so the investor borrows 100 shares of XYZ stock from a broker and sells them at the current market price of $50. If the price of XYZ stock drops to $40, the investor buys back the 100 shares and returns them to the broker, making a profit of $1000 ($50-$40 x 100 shares)Shorting can be a high-risk strategy because there is no limit to the amount of money an investor can lose if the price of the asset increases. The potential loss is theoretically infinite, because an asset's price can rise indefinitely, while the maximum possible gain is limited to the price at which the borrowed shares were sold.It is important to note that shorting is not legal or regulated in all markets, and it can also be restricted or limited by the stock exchange or brokerage. Additionally, shorting requires a margin account and it's also subject to margin calls, which means that an investor may have to deposit more money or close the position if the value of the shorted asset increases.
