Unlike long-only investors, short sellers attempt to profit from falling prices. As a directional approach, short selling is straightforward: sell stock and then buy it back to exit, or cover, the position. However, short sellers must first borrow the shares of stock they wish to sell. Short sellers are often regarded as sophisticated market players — traders who can identify stocks that are likely to underperform their peers, and who act aggressively to exploit that outlook. Roughly 20 years of empirical evidence supports this perception: Heavily shorted stocks lag the market, on average, earning profits for short sellers. Read on to learn more.
Most investors will rarely, if ever, consider selling shares of an ETF short as part of their investment program. However, short selling in the ETF marketplace is a large part of ETF trading volume.
Multi-leg options are two or more option transactions, or "legs", bought and/or sold simultaneously in order to achieve a certain investment goal.
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