Introduction
Short selling is a trading strategy that allows traders to profit from a decline in the price of an asset. It involves borrowing the asset from a broker, selling it in the market, and then repurchasing it later at a lower price to return to the lender. The difference between the selling price and the repurchasing price, minus borrowing fees and commissions, represents the trader's profit.
While short selling can be applied to various assets, including stocks and bonds, it is particularly common in the futures market. Futures contracts are agreements to buy or sell an underlying asset at a predetermined price and date in the future. These contracts are standardized and traded on exchanges, providing liquidity and transparency. Short selling futures involves selling a futures contract with the expectation that the price of the underlying asset will decline before the contract's expiration date.
