How does “shorting” the market work?

Hi there!

To put it in simple terms, shorting is basically borrowing shares from the broker and then selling it at the market price eg: $100 per share, and buying back the same amount of shares at a lower price eg: $80 per share and returning it to the broker.

In this case, the investor's profit is the difference between the price of the shares borrowed from the broker and the price of the shares bought and returned to the broker. For the above example, the profit would be $100 - $80 = $20 per share.

When the market is expected to tank, share prices plummet and hence the difference between the price of the shares borrowed from the broker and the price of the shares bought and returned to the broker increases thereby increasing profits.

Therefore, more people "short" the market during times like this.

https://www.investopedia.com/terms/s/shortselli...

All you need to know.