The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value, so that it can later be bought more cheaply and therefore returned to the borrower at a profit.
For example, an investor who borrows shares of stock from a broker and sells them on the open market is said to have a short position in the stock. The investor must eventually return the borrowed stock by buying it back from the open market. If the stock falls in price, the investor buys it for less than he or she sold it, thus making a profit.
In the context of options, it is the sale (also known as "writing") of an options contract.
For example, selling a call (or put) options contract to a buyer entitles the buyer the right, not the obligation to buy from (or sell to) you a specific commodity or asset for a specified amount at a specified date.
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