Short selling in financial markets is the practice of borrowing an asset, usually shares of stock, and selling it with the expectation that the price will decline. The goal is to buy the asset back at a lower price in the future, return it to the lender, and pocket the difference as profit. It’s a way to profit from downward price movements but comes with high risks, including the potential for unlimited losses if the asset’s price rises instead.
In the futures market, shorting refers to the act of selling a futures contract with the expectation that the price of the underlying asset will decrease. By doing so, the trader aims to buy back the contract at a lower price before it expires, profiting from the difference. Unlike short selling in the stock market, where you borrow shares to sell, shorting a futures contract doesn’t require borrowing. However, it does carry significant risk, as potential losses can be substantial if the market moves against the position.
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