With a long position, you buy a stock at a certain price and sell it at a higher price as the stock appreciates in value. The profit that you make is the difference between your buy price and the price that you sell it at.
With the short position what happens is that you’re really borrowing shares from your broker, you’re selling the shares first in the open market, then you buy those shares at a lower price and profiting from the difference there.
How do you make money by shorting?
How is the money made on the short side? In a real-world situation, let’s say you sell a camera or you list it on eBay for $125, it got sold, you got paid, now you need to deliver that camera, so that way you are at a neutral status, so you buy it from a friend for $95 because you knew that camera was available for cheap, and you made $30 in profit after you go ahead and ship that camera out.
Posted at: https://tradersfly.com/blog/what-does-it-mean-to-go-short/
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