Selling Produce Short

Selling produce short is selling it for future delivery when the seller does not own the property at the time of the sale, but hopes to be able to buy it at a less price when or before the time for delivery arrives, thus making a profit from a fall in price. The short seller is therefore a speculator.

In a 'short sale' of stock the contract for future delivery employed is a contract of borrowing. The seller does not, at the time of the sale, own any of the stock sold, but he borrows the same amount of stock from one who does own it and delivers the borrowed stock to the purchaser. The seller must return the stock to the lender and for this purpose he must buy it at some future time. He hopes to be able to buy it at less price than he sold it and thus make a profit of the difference between the two prices.

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Abuses of the Stock Exchange.

The distinction between legitimate speculation in "futures" and gambling on prices is not generally understood and, therefore, to many people both are equally objectionable.

The difference between gambling and selling "short" -- the limit of legitimate speculation and futures -- is thus clearly pointed out by Mr. T. Henry Dewey, of the New York Bar, in a booklet he has recently published.


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