A short sale is the sale of an asset, such as a bond or stock, that the seller does not own. It is generally a transaction in which an investor borrows a security from a broker, and then sells it in anticipation of a price decline. The seller is then required to return an equal number of shares at some point in the future.

The assumption behind a short sale is that, if the price declines, the seller can buy the security back at the lower price and return it to the broker. In contrast, a seller in a long position owns the security or stock.