What does the term "short selling" mean?

Short selling refers to the practice of selling shares that an investor does not own but has borrowed, with the intent of repurchasing those shares later at a lower price. This strategy allows investors to profit from a decline in the price of the stock. The process involves borrowing shares from another investor, selling them on the open market, and then waiting for the stock price to drop before buying the same number of shares back to return to the lender. If executed successfully, the difference between the selling price and the repurchase price represents the profit made by the investor.

The concept hinges on the investor's expectation that the stock's price will fall. If the price does decline, the investor can buy back the shares at a lower cost and return them to the lender, reaping a profit in the process. However, short selling also carries significant risks, as if the stock price rises instead of falling, the investor may face unlimited losses.

The other options closely relate to different investment strategies but do not accurately capture the essence of short selling. Selling shares owned by the investor typically refers to taking profits or exiting a position rather than engaging in a short sale. Selling shares held long-term indicates a different strategy focused on realizing gains from previously owned assets. Buying shares in