Short sale

The sale of securities, commodities or foreign currency that the seller does not yet possess

An investor who sells short is speculating that before the trade must be settled, he will be able to acquire the securities or commodities at a price lower than his selling price. The difference between the sale price and the purchase price is his profit - or loss.

In Germany, exchange transactions must be settled within two days. An investor who sells short and is unable to deliver the securities before this time must borrow them from another party. He is then obliged to buy the securities and return them to the lender before the loan period or the repo agreement expires.

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