What financial product allows you to profit when a stock price goes down?

 

What financial product allows you to profit when a stock price goes down?

A) Call option
B) Short selling
C) Mutual fund
D) IPO

✅ Correct Answer: B) Short selling

Explanation (Briefly):

Short selling is a trading strategy where an investor borrows shares of a stock and sells them at the current market price, hoping that the stock price will fall.

• Later, the investor buys back the same number of shares at a lower price and returns them to the lender, keeping the difference as profit.

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Example:

• You borrow and sell a stock at $100.

• The stock price drops to $70.

• You buy it back at $70, return the share, and keep $30 as profit.

🔁 The lower the stock price goes, the more profit you make.

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However, short selling is risky — if the stock price rises instead of falling, your losses can be unlimited