A "Short" is someone who borrows shares at whatever the current price is and sells them. Then hopes the price goes down so they can buy them back ("cover") at a lower price to return to the borrower. The short profits by the difference in price (minus commission and shorting fees from the broker) if the stock falls after they day they got in.
Shorting is very risky, because if the price goes up, they can lose much more than a regular "long" stock buyer. A "long" can lose 100 % if the stock goes from $5.00 to $0. But a short can lose infinite amounts if it keeps going up, because at some point they have to buy back the shares they borrowed. If they borrowed and sold at $5.00, but the stock rises to $25 instead of falling, and the short gives up and buys back at $25, they have lost $20 on the stock, or 400%.
The word "short", "shorty" etc is often tossed around on message boards to anyone who takes a non-bullish opinion of a stock. However, in addition to the extra risk, most brokerages will not let you short penny stocks, due to price volatility, and the few that do may require you to have significant extra funds on hand to cover in case the price rises a lot instead of falling. In some cases, the brokerage will force buy back the stock on your behalf if they feel it is too risky to continue to hold. You may end up with a big loss, even though you did not want to exit the stock at that point.
So shorting penny stocks (or any in my opinion) is risky and not for the faint of heart. Despite the frequency with which people are called "short" I suspect there are very few people actually shorting penny stocks.
In some cases I would like to, but I am too chicken.
I suggest investopedia.com for all kinds of useful investing information.
AI
