A short seller
A) anticipates that the price of the stock sold short will increase.
B) earns the difference between what was initially paid for the stock versus what the stock is later sold for.
C) makes a profit equal to the difference between the original selling price and the price paid for the stock, after subtracting any dividend payments made.
D) is essentially lending the stock to another investor and will ultimately receive that stock back from that investor.
E) none of the above

Question

Quizplus · Accepted Answer

Short sellers aim to earn a profit by selling shares of a stock they don't own in anticipation that the stock price will decrease. They will buy back the shares later at the lower price, earning the difference between the price they sold the shares for and the price they bought them back for. This difference, after subtracting any dividend payments made, is the profit made by the short seller.

A Short Seller