TL,DR: Long and short take on new meaning as financial jargon

Long and Short / Buyers and Sellers

Imagine you need to record a transaction - the sale of an lamb - but don’t have a pen or paper or any real technology. You might represent the transaction with a wooden stick, breaking it into two pieces of different lengths. The long piece goes to the buyer of the lamb, who provided money in exchange for the animal. The seller receives the short piece, as a record of their contribution, the lamb. After the lamb is butchered and the money spent, the transaction will still be recorded by the sticks. And putting the sticks together can confirm they belong on opposite sides of the same transaction.

This is how transactions and debts were recorded in Medieval Europe, and may have birthed the financial terms “long” for buyer, and “short” for seller. Additional tally marks could be added to the sticks, providing a unique and tamper proof system for having a receipt of sale and record of debt payment.

Financials

Holding a long position is a fancy way of saying you own something and want it to be valuable. Short positions are a bit more complicated. If approved to short sell, investors can bet against a product. To do so you borrow shares of the product from the bank with a promise to return them in the future. Next, you immediately sell the products at the current market price. In the future, when it’s time to return the borrowed shares to the bank, you can buy them back from the market - hopefully at a lower price. The difference between your sell price and buy price will be your profit.

Short Squeeze

Short positions are risky because the stock price could go up. Additionally - short investors are exposed to a short squeeze - where the long investors double down on the stock, driving it’s price up even further, forcing the short sellers to buy, which also increases the price of the stock.

TL,DR: Long and short take on new meaning as financial jargon

Long and Short / Buyers and Sellers

Imagine you need to record a transaction - the sale of an lamb - but don’t have a pen or paper or any real technology. You might represent the transaction with a wooden stick, breaking it into two pieces of different lengths. The long piece goes to the buyer of the lamb, who provided money in exchange for the animal. The seller receives the short piece, as a record of their contribution, the lamb. After the lamb is butchered and the money spent, the transaction will still be recorded by the sticks. And putting the sticks together can confirm they belong on opposite sides of the same transaction.

This is how transactions and debts were recorded in Medieval Europe, and may have birthed the financial terms “long” for buyer, and “short” for seller. Additional tally marks could be added to the sticks, providing a unique and tamper proof system for having a receipt of sale and record of debt payment.

Financials

Holding a long position is a fancy way of saying you own something and want it to be valuable. Short positions are a bit more complicated. If approved to short sell, investors can bet against a product. To do so you borrow shares of the product from the bank with a promise to return them in the future. Next, you immediately sell the products at the current market price. In the future, when it’s time to return the borrowed shares to the bank, you can buy them back from the market - hopefully at a lower price. The difference between your sell price and buy price will be your profit.

Short Squeeze

Short positions are risky because the stock price could go up. Additionally - short investors are exposed to a short squeeze - where the long investors double down on the stock, driving it’s price up even further, forcing the short sellers to buy, which also increases the price of the stock.