Short sale in finance is the process of selling assets, usually securities, which are not owned by the seller but have been borrowed from a third party, usually a broker. It is binding on the seller to buy identical assets at a later date and return them to the broker. The seller is required to pay lending fees for the transaction as well as dividends paid on the borrowed assets. The people who are going for short sale hopes to profit from a decline in the price of the asset between sales and repurchase as the seller will have to pay less at the time of buying compared to what he paid at the time of selling. So mathematically short sale can be considered as purchasing negative amount of assets. However in case the price of the asset rises then the seller will have to buy back the asset at a higher price and the short seller will incur a loss. There is no theoretical limit to the amount of loss that can be suffered by a short seller since the asset may increase in value by any amount. Short selling is always conducted with assets that can be monitored in real time. Most common examples of such assets are public securities, commodities or currency markets. Basically short selling is the opposite of the traditional practice of going long in which an investor hopes to profit from an incline in the prices of the shares.
People who go for short sale usually borrow from a broker who is holding securities of other lenders. Due to the large pool of securities held by the broker it is possible for the lender to sell the securities if he or she wishes to. Funds held in pension funds, mutual funds etc generally account for the largest of lending. The act of buying back the securities that were sold short is called as covering the short, after which the short seller is not affected by any further incline or decline in the price of the security. Similarly a short position in futures contract means the holder of the position has an obligation to sell the underlying asset later at a given price. If the price falls below the given price, the person with the short position can buy the asset at a lower price and sell it under the future at the higher price. Investors who employ 任意売却のご相談や任意売却のご依頼は管財へ often use it to allow them to profit on trading in securities which they feel are undervalued. Unlike in going long, in short sale the profit is limited by the value of the asset however the loss is theoretically unlimited. Short selling has also been considered to be responsible for undesirable market volatility. For this reason in September 2008 US Securities and Exchange Commission prohibited short selling for 799 financial companies for three weeks. There have been several such examples in several other countries as well. Some countries have also banned the practice permanently to counter adverse effects of the economic crisis.