According to Investopedia.com selling a stock short is "the selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short."

For example, you sell short 100 shares of XYZ Inc at $10 per share thinking that the price will fall and you will gain the difference. If the price falls to $9 per share then you make $100 (before commissions).

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