Short (finance) facts for kids

To short an asset means to bet that the asset will lose value, or that the current price is overvalued (higher than its supposed value). If the asset in question does indeed lose value, the person who shorted it will win the bet, and make a profit. This can be done by borrowing assets and selling them at a higher price, returning the asset once you can buy it back at a lower price.

For example, if you think that Tesla stocks will lose 10% of the value, you could short the stock, and make a 10% profit once it goes down by 10%. However, if Tesla stock gains value, than you will lose the equivalent amount.

Images for kids

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  Schematic representation of physical short selling in two steps. The short seller borrows shares and immediately sells them. The short seller then expects the price to decrease, after which the seller can profit by purchasing the shares to return to the lender.

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  Replica of an East Indiaman of the Dutch East India Company/United East India Company, or (VOC).

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  Courtyard of the Amsterdam Stock Exchange (Beurs van Hendrick de Keyser in Dutch)

See also

In Spanish: Posición corta para niños