Pros of engaging in short selling
- Provides an opportunity to profit from a decline in stock or market value.
Cons of engaging in short selling
- No ownership stake in the business is obtained.
- Potential for unlimited losses as stock prices can continue to rise.
- Requires a margin account to initiate short selling.
- Additional costs such as margin interest and borrowing fees apply.
- Responsibility to pay any dividends distributed by the shorted stock.