short sale

A sale of a security that the seller does not own or has not contracted for at the time of sale, and that the seller must borrow to make delivery.

• Such a sale is usu. made when the seller expects the security’s price to drop. If the price does drop, the seller can make a profit on the difference between the price of the shares sold and the lower price of the shares bought to pay back the borrowed shares.

— Also termed sale short. [Cases: Securities Regulation 45.17. C.J.S. Securities Regulation § 117.]


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