Capital Gains & Losses

A Short Sale, or selling short, refers to when a person sells a stock before he or she owns it. The person wants the stock price to go down, so it can be bought back at a cheaper price. When you sell short you must borrow money to cover the sale. Usually, the seller's brokerage firm arranges to borrow stock to make delivery to the buyer until the seller "closes" the position by purchasing stock and turning it over to the brokerage firm.