Short selling (Leerverkauf)
Selling borrowed shares in the hope of buying them back cheaper later. The possible loss is theoretically unlimited.
In short
As of 8 October 2026Short selling means selling borrowed shares in the hope of buying them back cheaper later, a bet on falling prices. Because a stock can rise without limit, the possible loss is theoretically unlimited. Naked short selling of shares is banned in the EU, and larger positions must be reported.
In short selling, an investor borrows shares, sells them right away and hopes to buy them back cheaper later. The difference is the profit. It is a bet on falling prices, for example in a bear market.
The risk is large: a stock can fall at most to zero but rise without limit. If the price jumps, short sellers must buy back at high prices, which can trigger a short squeeze. Naked short selling of shares is banned in the EU. Net short positions of 0.1 % or more must be reported to the supervisor, and from 0.5 % they are published, in Germany via BaFin.
Example: selling at 100 euros and buying back at 80 earns 20 euros. If the stock instead rises to 200, the loss is 100 euros per share.
Related terms
Sources
As of 8 October 2026 · Educational content, not investment or tax advice.