Short position
A short position is a trade that profits when an asset's price falls. To open a short position, a trader borrows shares and sells them at the entry price. The trader later buys the same number of shares at the exit price and returns the borrowed shares.
Marker A shows an AMD short position opened at $100 per share. The green line marks the entry price. Marker B shows the shares bought back at $110 each. The red line marks the exit price.
The trader received $100 when selling each borrowed share. Closing the position cost $110 per share. The price increased by $10, so the short position lost $10 per share.
Short result = (entry price − exit price) × quantity
($100 − $110) × 1 = −$10, or a $10 loss
For ten shares, the same $10 loss applies to every share. The total loss is $100:
($100 − $110) × 10 = −$100, or a $100 loss
A long position buys first and sells later. A short position sells first and buys back later. This reverses which price movement is helpful. A short position profits when the exit is below the entry. It loses when the exit is above the entry.
Did the short position from $100 to $110 produce a profit or a loss?
Choose one answer.