What is Shorting?

Shorting is a way of investing that lets you profit when a stock price goes *down*. Normally, when you buy a stock, you make money if the price goes up (you know the adage, "buy low, sell high"). It's just the opposite when you short a stock: you make money if the price drops; if the price rises you *lose* money.

Here's an example:

• Say you short 10 shares of YAO when his price is at $100. You pay $1000. A week later, his price drops to $50. You *profit* $50/share or $500. The value of your position rises to $1500 and you do a victory dance.

Why do you have Shorting?

Shorting gives traders a way to let the market know that a player or team is priced too high by putting downward pressure on the stock price. Without shorting, the naysayers don't have a voice in the market... other than writing grumbling posts about a player or team being overvalued.

How do I short?

Look for the "Advanced" links on the player and team pages. Yes, we consider shorting an advanced feature - it's not for everyone. You can also short via the stock screener from within your portfolio. Click on the Detail tab and use the screener to find a stock you think is overpriced. Instead of Buy, click Short to begin your trade.

If "sell" is the opposite of "buy", what is the opposite of "short"?

Cover. Technically, the phrase "buy to cover" is used in markets. Cover is just an easy way to know that you are talking about reversing a short rather than a normal buy.

How much can I short?

Just like when buying, you can short up to $15k or 15% of your total portfolio value in one stock. Also, at trade time, the total value of all short positions cannot make up more than 30% of your portfolio.

How much can I lose?

At PROTRADE, you can only lose 100% of what you short. If you short 10 shares of YAO when his price is at $100 and a week later his stock price rises to $150 per share, you only lose your original $1000 investment. If you did the math, you'd actually need another $500 to cover your debt, but our friendly Market Maker caps your loss at the original investment amount. No need to thank us - we don't want you to lose all your money and stop playing.

How can I keep track of shorted stocks in my portfolios?

Shorted stocks are italicized.

Now I'm curious. Where can I learn more about how shorting works outside PROTRADE?

To read more about shorting:
http://en.wikipedia.org/wiki/Short_selling
http://beginnersinvest.about.com/cs/newinvestors/a/022703a.htm
http://www.fool.com/FoolFAQ/FoolFAQ0033.htm