Commentary 
In an article on hedging, I pointed out that an investor can use short positions to reduce or eliminate specific risks. I often get questions from friends and amateur investors on how to short a stock. It’s an important tool for any investor, and I think the subject deserves a more complete treatment.
The process of shorting a stock is like buying a stock in reverse and typically represents a bet that the stock will decline. Let’s imagine we own a number of tech stocks and are concerned that future interest rate increases may cause the market to go down. We might want to continue to own the stocks that we like, and to short the NASDAQ 100 (ticker: QQQ), a tech-heavy exchange-traded fund (ETF) to protect against the above-mentioned rate increases. (Please note that we are not recommending any specific investment; but rather, are providing a hypothetical example.)…