What is a short position?

A short position refers to the practice of selling borrowed securities with the intention of buying them back at a lower price in the future. This strategy is based on the expectation that the price of the security will decline. An investor who takes a short position hopes to profit from the difference between the selling price at which they initially sold the securities and the lower price at which they plan to repurchase them.

For example, if an investor believes that the value of a stock will decrease, they can borrow shares of that stock and sell them at the current market price. If the stock price drops as anticipated, they can then buy back the shares at the lower price, return them to the lender, and keep the difference as profit. This explains why the option that describes borrowing assets to sell with the hope of buying back cheaper accurately defines a short position.

In contrast, the other options represent different investment strategies that do not align with the concept of short selling. Purchasing securities with the expectation of a price rise indicates a long position, while holding securities for long-term growth also relates to a long investment strategy. Investing in government bonds generally involves a safer, more stable investment approach, which is distinct from the speculative nature of short selling.