Just call us Bond. Amortized bond.
Over 700 finance terms, Shmooped to perfection.
Selling something that you don't currently own because you think the price will go down. You borrow the security and sell it. If you're right, the price drops and you buy it back later for less. Put another way: Your Granddad always said, "buy low, sell high." This is just "sell high, buy low."
The net result is the same.
You see sales of Lost company for $40 a share. You think the price is about to head down so you borrow ten shares and sell 'em for $40. You make $400. A week later the shares are selling for $10. You buy the stock for $10. That's 10 shares for $100 and you give back what you've borrowed. The $300 difference is your profit.