What is Long-Short Investing?

The long-short investing strategy involves buying shares of stock in one company and shorting others. This strategy is often implemented by hedge funds. They short a company that is doing the worst and buy shares in a company that is doing well.

The meaning behind long is closely related with buying. For example, when you say go long 200 shares of Microsoft, you mean that you want to purchase shares of Microsoft. On the other hand, the meaning behind short is closely related to selling. For example, when you say short 200 shares of Microsoft, you mean that you want to sell the shares you possess of Microsoft.

Other meanings of long and short are related with your position regarding a stock. The long position concerns the investor's ownership of securities. For example, if you state that you are long 200 Microsoft, then this means that you are the owner of these shares. On the other hand, short position occurs when the investor sells stocks which are "borrowed" and s/he does not yet own. Generally, stock traders create a short position when they expect the price to go down.

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