What is short selling?

Short selling is an investment strategy designed to profit from an expected decline in an asset. It is done by "borrowing" shares of the investment from a brokerage firm (via margin), selling those shares in the market at the then current price and once the investment declines in value to the desired target, repurchasing at the lower price and returning the borrowed shares to the brokerage firm. The profit would be the market price when first sold minus the repurchased price and borrowing costs.

Short selling is a very aggressive strategy and has theoretically unlimited loss potential because if the price of the investment goes up, the short seller must then repurchase at the higher price thus realizing a loss. If the price is going up, the investor will receive a "margin call" which means they have to maintain a certain amount of cash in their account to cover losses.

Some alternative ways to "short sell" and limit loss is done by purchasing one or a combination of options on an underlying asset or purchasing an "inverse" fund or ETF in which the underlying strategy is short selling.