Short Selling

The practice of borrowing shares of a stock and selling them with the intention of buying them back later at a lower price to profit from a decline. Short sellers borrow shares through their broker, sell on the open market, and eventually "cover" by repurchasing and returning the shares. The strategy carries theoretically unlimited risk because a stock can rise indefinitely. Famous short sellers like Jim Chanos (who shorted Enron) and Andrew Left argue that short selling serves a vital market function by exposing overvalued or fraudulent companies.