How to Make Money Selling Stock Short?

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When doing a stock short sale, a person is selling a stock before it is bought. Learn about the risks of short selling in the stock market with help from a portfolio manager in this free video on personal finance and money management.

Part of the Video Series: Stocks & Bonds
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Video Transcript

So, you're wondering how to sell a stock, how to make money selling a stock short. When we do a stock short sale what we're doing is selling a stock before we buy it, before we own it, and the way that works is that ideally you sell a stock in the morning for say fifty dollars. In the morning, in the afternoon rather, it's gone down to forty dollars and you can buy it back at forty, so you've made a net profit of ten dollars per share. That's an extreme example, doesn't often happen that way. And short selling is very risky, because if the stock does not come down you have to, at the end of the day, buy the stock that you sold in the morning. You do need to come up with the money and and purchase what you sold earlier in the day, so there are risks involved. And if you miscalculate, or sell the, short sell the the wrong stock at the wrong time there is money to be lost. It's not an uncommon practice, but it's something that does require a lot of research and a lot of knowledge about A, the company; where they're going, and also how the market works.

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