What is shorting in equity?

Shorting in equity, also known as short selling or shorting a stock, is a trading strategy in which an investor borrows shares of a stock from a broker or another investor, sells those shares on the open market, and then buys them back at a later time to return them to the original owner.

The goal of shorting a stock is to profit from a decline in the price of the stock. For example, if an investor thinks that a particular stock is overvalued and is likely to decline in price, they can short the stock to profit from the decline. If the price of the stock does indeed decline, the investor can buy back the shares at the lower price, return them to the original owner, and keep the difference as profit.

Short selling can be a risky strategy because there is no limit to how much money an investor can lose if the stock price rises instead of falls. In a worst-case scenario, an investor can lose an unlimited amount of money if the stock price continues to rise indefinitely. Because of this risk, short selling is generally considered a more advanced trading strategy and is typically used by experienced traders.

It's important to note that shorting a stock is not always possible. Some stocks may be difficult or impossible to short due to restrictions imposed by the exchange or regulatory authorities. Additionally, short selling is typically subject to margin requirements, which means that the investor must have sufficient collateral or cash on hand to cover any losses that may occur.