What is the customer's expectation when executing a short sale?

When a customer engages in a short sale, their primary expectation is that the market value of the security will decrease. In a short sale, the investor borrows shares of a stock and sells them on the open market, anticipating that they can repurchase those shares later at a lower price. If the price does decrease, the investor can buy back the shares at this lower price and return them to the lender, thus pocketing the difference as profit.

The rationale behind this strategy is rooted in the expectation of market movements; if the expectation is met and the security’s price declines, the investor stands to gain. This understanding of market behavior underlines why a decrease in the market value of a security aligns with the goals of someone executing a short sale.