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Greetings,

What are shorts?

I'll assume you mean the definition with regard to the stock market rather than the type of clothing called shorts. Shorts are either short positions or people that hold short positions. A short position is where someone sells borrowed stock with the intention of buying it back and a lower price.

How are they used?

I think it is best to think of shorts are being the reverse of a long position. In a long position you buy the stock and then sell the stock, collecting any dividends along the way. In a short it is reversed so that you sell the stock and then buy it back usually, remembering to account for any dividends along the way. Shorts are used on margin accounts and there are rules about what can be shorted and when you may be forced to cover similar to the case where if bought a stock on margin and it drops there is the possibility of a margin call.

How do they effect stocks that I might own?

When a lot of folks short a stock this could cause a bit of a dip, and similarly a rally could happen if they are forced to cover.

http://www.fool.com/News/mft/2004/mft04012116.htm is an article with a little more on shorts. http://invest-faq.com/articles/trade-short.html also has some more details on a short.

Regards,
JB
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