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Short selling
BörseErwachsene
Betting on falling prices: you borrow shares, sell them immediately and buy them back cheaper later. Extremely risky – the loss is theoretically unlimited.
With short selling (Leerverkauf), you bet that a share will lose value. It works like this:
1. You borrow 100 shares from your broker
2. You sell them immediately for €50 each = €5,000 income
3. The price falls to €30 per share
4. You buy back 100 shares for €3,000
5. You return the shares to the broker
6. Your profit: €2,000
The risk: if the price RISES instead of falling, you lose. And while a normal share can fall to €0 at most (limited loss), it can theoretically rise without limit – your loss on a short sale is theoretically unlimited.
Did you know? The 2021 GameStop saga showed what happens when short sellers miscalculate: hedge funds had heavily shorted GameStop. Reddit users drove the price from $20 to over $400 – the hedge funds lost billions.
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