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Short selling

As explained in Investing for Programmers

Short selling is a trading technique in which a trader borrows and sells an asset, intending to repurchase it later at a lower price.

Short selling seeks profit from a price decline: a trader borrows an asset, sells it at the current price, and later repurchases it at a lower cost. section 1.3.3 section 7.5.1

A short position connects trading mechanics with risk discipline:

  • The position depends on correctly anticipating declining prices rather than rising prices. section 1.3.3
  • Bear markets can create opportunities, but incorrect predictions can produce losses. section 7.5.1
  • Fact-based decisions and a risk profile suited to market stress matter because emotions can undermine discipline. section 7.5.1

A declining-market trade

A trader borrows shares and sells them during a bear market, then aims to repurchase them after the price falls. The housing-bubble prediction associated with 2008 illustrates both the potential payoff and the danger of being wrong. section 7.5.1

How Investing for Programmers covers it

How deep it goes
Defines borrowing, selling, and repurchasing, but stops short of execution mechanics and detailed loss calculations.
Examples
Uses borrowed shares, bear-market opportunities, and the 2008 housing-bubble prediction as concrete illustrations.
What you can do after
Evaluate short-selling mechanics, directional assumptions, prediction risk, and the discipline required during market turmoil.
How it connects
Connects short selling with trading, long positions, bear markets, investor psychology, and risk management.
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Related concepts

This explainer was generated by Manning's knowledge graph from the text of Investing for Programmers. The section links point to the parts of the book it draws on.