CJR: Allow me to butt in, since Tony is on vacation. If you have a margin account you can sell shares "short", which just means that you ask your broker to find some shares held by someone else to sell at the current price. Sometimes shares are not available to short. You don't buy the shares now. You receive the price for selling the shares now, but are obligated to repurchase the shares at some point in the future to "cover" your short sale. If the price goes up, you have to pay a higher price to buy the shares to cover and you lose money. If your margin limits are reached, your broker can require you to cover (i.e. buy some stock at the new price), causing you to take that loss. Of course, if the price of the stock you sold short goes down, you can cover at a lower price, in which case you keep the difference.
The advantage of short selling in a volatile market is that the opportunities present themselves to you with some notice. You can see when a stock has spiked up and usually there is at least some retracement when a stock spikes up precipitously. To benefit from a spike up on the long side, you have to be lucky enough to be in the stock when the run-up starts, often with no advance warning. The disadvantage, it is often said, is that your maximum gain is 100%, while your maximum risk is, theoretically, infinite.
Hope this clarifies some.
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