RE:Can anyone explain in layman's termsHevin > Short selling is the practice of borrowing shares in a stock and selling those shares, with the obligation to buy them back in the future. A short seller makes a profit if the stock falls, and he can buy it back for less than he sold it for. If the stock goes up, well, thats another story. Arbitrage is the act of buying something at one price and simultaneously selling it for another price. The term is often used to mean any transaction which locks in a virtually risk free profit. An example of arbitrage would be buying BRK.A shares, which are convertible into BRK.B shares at a fixed exchange rate, for a price lower than that implied by the BRK.B shares, and simultaneously selling BRK.B shares. Short selling is the opposite of buying a stock. The opposite of arbitrage would be buying a chocolate bar for $1, under the condition that the cashier immediately buy it back from you for $0.75. Short selling is difficult, extremely risky, and best left to professionals. If you are able to find stocks that trade for more than they should, theres little doubt that you could make more money with less risk by buying stocks that trade for less than they should. Arbitrages are free lunches, and I cant complain about a free lunch. Unfortunately for us, most arbitrages are eliminated in the blink of an eye by hedge fund managers wielding computer models. There are still free lunches in the stock market, but it takes hard work to find them. Still a little convoluted... Chevy