Short Position
Borrowing shares and selling them, hoping to buy them back cheaper. Profit when the price falls; loss when it rises.
A short position is established by borrowing shares from a broker and selling them at the current price, with the obligation to buy them back later and return them. You profit if the price falls — you buy back at a lower price than you sold.
Short selling is fundamentally asymmetric: your maximum profit is 100% (if the stock goes to zero), but your potential loss is theoretically unlimited (there is no ceiling on how high the price can rise against you).
Short sellers face additional risks: short squeezes occur when a heavily shorted stock rises sharply, forcing short sellers to cover (buy back) at a loss, which accelerates the upward price move. Borrowing costs also eat into returns.
On the desk
You short 100 shares of XYZ at $80 (receive $8,000). The stock falls to $55. You buy back 100 shares for $5,500, return them to the lender, and pocket a $2,500 profit (before fees and borrowing costs).