Short short position

Having a ‘short position’ on an asset, equivalent to ‘shorting’ or ‘being short’ the asset, involves borrowing the asset and selling it, with the expectation that it will fall in value.

For example, if an investor believes that the price of Nestlé will drop, he can short the stock. Assuming the price of the share at the time of sale is CHF 55. He will have to borrow the share from a broker and sell it immediately in the market for CHF 55. If the price of Nestlé falls to CHF 50 one month later, he can repurchase the share at CHF 50 and return it to the broker. His profit will be CHF 55 – CHF 50 = CHF 5.

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