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Byline: DAVID SAITO-CHUNG
The Art Of Short Selling
Is selling stocks short unpatriotic? Or simply wrong?
This question has perhaps crossed the minds of some who have read this short series on the topic.
Short selling -- selling borrowed shares of a stock in expectation of a future drop in price -- is clearly more controversial than going long in a growth stock. After all, why would anyone bet against mankind's desire for growth and progress?
Well, some companies do lie, and some investors want them to pay for it. Some traders go as far as telling the public they have shorted a stock and why. Some argue that they are doing a service to the public. Other professional short sellers simply do so because they think they've spotted the end of a stock's run.
The cold truth about short selling is that it takes place on a large-scale basis, day in and day out. Market makers on the Nasdaq and specialists on the NYSE often sell a stock short to meet the other side of an investor's trade. Both exchanges keep tabs on the level of shares sold short in each stock.