Short Sale
Short Sale is an investment strategy, when investor borrows securities for which he believes to be overvalued, sells them and waits for the price to go down to buy them back and return them to the lender.
Short selling is a very risky technique because unlimited upward movement of the stocks and is advisable only to experienced investors.
In addition, there is a SEC regulation that short selling is only allowed on an uptick or zero-plus tick, in order to prevent raiders to drive the price down by heavy short selling and make hostile takeovers. Also, SEC requires 150% of the value of the short-sold shares to be held in the account, as insurance that earnings from sold shares would not be used for buying new shares before borrowed shares are returned.
| Related Terms: Plus Tick Rule Rebate Tick Test |