A short position is a trading position in which the trader benefits when the underlying asset price falls and loses when the price rises, all else being equal.

In derivatives trading, a short is generally opened by selling the relevant contract. In traditional margin structures, a borrowed asset can also be sold with the intention of buying it back later at a lower price.

Example

If a BTC short position is opened at $60,000 and closed at $57,000, the price change is approximately -5%, which corresponds to approximately a 5% positive position result before costs.

If the price rises instead, the position loses value. With leverage, a strong price increase can lead to liquidation.

Unlike a long position, the theoretical loss on an unhedged short position can be very large because an asset price has no fixed upper limit.