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Over 700 finance terms, Shmooped to perfection.
When an investor makes a bet that the price of shares will decline.
When you short stock, you sell a stock you don't own by borrowing it from your broker. Once you make the sale, the money is credited to your account. Then you close the short; that is, you buy the stock to give the money back to your broker.
If the stock has declined in price, you pay less than what you earned, and the difference is your profit. If the stock you've already sold has gone up in price, you have to buy the more expensive price and you lose some cash.