Short selling primarily involves which of the following practices?

Short selling primarily involves the practice of selling high and repurchasing lower for profit. This strategy allows investors to capitalize on a decline in the price of a stock. In a short sale, an investor borrows shares of a stock they believe will decrease in value, sells those shares at the current market price, and later buys back the shares at a lower price to return to the lender. The difference between the selling price and the repurchase price represents the investor's profit.

This method relies on the anticipation that the stock’s price will drop, enabling the investor to exit the position at a better price than where they entered. It is distinct from buying low and holding for long-term gains, which involves a different investment strategy focused on value appreciation over time, rather than profiting from market declines.

Investing in initial public offerings (IPOs) does not relate to short selling, as this activity is focused on acquiring newly issued shares rather than betting against existing shares. Similarly, selling stock at the lowest price to ensure quick profits mischaracterizes the strategy of short selling, as it does not align with the mechanics of selling borrowed shares high and repurchasing them at a lower price later. Thus, the correct understanding of short selling focuses on the act