Meaning of shorted?

Question

Hi,what is the meaning of shorted in the following text?Good thing we shorted Krane Chemical (shares) last week.Thanks

Anonymous · Accepted Answer

To sell short in the stock market is a way to make money when a stock's price drops.

AlpheccaStars · Answer

Long - you buy the shares and pay the current price. The shares belong to you and you can sell them in the future.

Short - you borrow some shares and sell them. You buy them back at some time in the future and then return the borrowed shares.

Imagine that Mr. Smith thinks that Krane Chemical is going to have a poor performance. and its shares will drop in value. Mr. Smith borrows 1000 shares when the share value is $10 per share. He sells them and gets $10,000 from the sale. But he never owned the shares, so he has to buy shares later to replace the ones he borrowed. Next week the share value drops to $8. He buys the 1000 shares for $8. That costs him $8000. He gives the 1000 shares back.

He got $10000, and had to pay $8000, so he made a profit of $2000.

Meaning of shorted?

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