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What is Short Selling?

Posted on November 28, 2021November 28, 2021

According to Investopedia (www.investopedia.com) short selling is an investment strategy that is speculative in nature.  Inasmuch as a stock or security price might drop in value, experienced traders sometimes use a “short” position to speculate that the stock or security will drop in value. Experienced investors understand that short selling is highly speculative and carries substantial risks.

Why Short Selling in on the Decline

This week the MSM reported that short selling was becoming less prevalent.  www.msn.com/money/markets.  Investment experts claim that the bull markets that have prevailed are creating a less than ideal ecosystem for investors betting against stocks and securities.  Simply put, stock prices have risen more than they’ve come down.  Temper this against a backdrop of record earnings, prevailing low-interest rates and a financially viable consumer base, short-sellers today are greatly disincentivized.

Investors are Making a Fortune

Despite the reported decline in short selling, investors in today’s markets are making record profits.  Companies like Apple have more than doubled their profits during the pandemic-fuelled spending craze.  www.cbsnews.com/news/apple-reaches-record-profits-in-first-quarter-of-2021/. Ditto for Telsa and Pzizer stock valuations that are sitting at record highs. So, while the stock market continues to report record highs it is possible that short-selling activities will likely continue to decline.

Elaine Allan, BA, MBA

Technology and Business Blogger

Vancouver, BC, Canada

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