Short Stock
...or Sell XYZ Stock Short
Position
Type
Strike
Expiration
Quantity
Short
Stock
 
         
Example:
Short 200 Shares XYZ @ $60
Opinion: Bearish to very bearish
  
   
Description:
Not often used by bearish investors. Although mechanics of execution are not that complicated, most investors only think in terms of making money from a stock advancing, not by one declining.

Strategy Profile:

see Long Put

When to use:

When bearish on XYZ and willing to accept the strategy’s risk/reward profile. Offers the greatest potential if opinion is correct. If wrong, has the highest potential risk.


Profit & Loss Characteristics:

Profit increases as XYZ declines. Loss increases as XYZ rallies. The strategy’s P&L is based solely on the difference between the initial selling price and the eventual purchase price.


Break-even Points:
Initial shorting price.

Time Decay:

No effect.


Volatility:

The more volatile the underlying stock becomes, the greater the potential for both larger profits and larger losses.


Note:
Short-selling requires that the investor have a complete understanding of both how shares are borrowed and lent and the responsibilities and rights of both parties to the agreement.