Market Structure
What is Short Selling?
Short selling means borrowing shares from a broker, selling them at the current price, and buying them back later (hopefully cheaper) to return, a way to profit from stock declines or hedge long exposure.
Formula
Short Profit = (Sale Price - Buyback Price) × Shares - Borrow Fees - Dividends Paid
How to Interpret
Maximum loss is theoretically unlimited (stock can keep rising). Losses become real when shares are 'hard-to-borrow' (high borrow fees), get recalled, or trigger a short squeeze (GameStop 2021, AMC 2021). US short interest is publicly reported semi-monthly, track 'Short Interest %' and 'Days to Cover'. India allows intraday short selling and stock-borrow lending (SLB), but rules and costs differ from the US.
Typical Ranges
Short interest >20% of float and Days-to-Cover >5 = squeeze risk. Borrow fees on hard-to-borrow names can exceed 30% annualized.