A margin call is a way for traders to pay off debts by selling a security before they may be ready to do so.

Investors need a 'margin account' to short sell stock

Margin accounts are leveraged accounts through brokerage firms that allow investors to make trades without the full amount of capital on hand. Similar to a secured loan, margin accounts often require some form of collateral and typically have a cap on how much investors can borrow. However, trading with a margin account is much riskier than a traditional investment account. Fees and charged interest are due on margin accounts, regardless of trade performance, meaning it's possible for investors to lose more money than just their initial investment.

Shorting is a high-risk and expensive investment strategy that hedge funds specialize in

Most investors buy stocks with the expectation that those stocks will be worth more tomorrow than they are today. Short selling, known as “shorting,” a stock is the opposite: The investor is betting the stock will drop in value.

Call options 101

A call option is a contract that gives the option buyer the right to buy an underlying asset at a specified price within a specific time period. A call buyer profits when the underlying asset increases in price. Learn more about the financial contract and how you can use it in this article.

How to put on a hedge

These days, hedging your portfolio isn’t just for hedge fund managers. An explainer from Robinhood delves into what a hedged position actually is, why traders put on hedges, and how you, too, can work to guard your holdings against a market downturn. The idea is to derive gains from your portfolio when markets are trending up, down, or sideways.

While day trading has risen in popularity in recent years, the SEC warns it is a speculative strategy that can cause big losses

A day trader is anyone who buys and sells a stock within the same trading day. They quickly move in and out of the market to try and profit. Some day traders are professionals, while others are retail investors.

Prediction markets have their own lingo that's an amalgamation of Gen Z and Gen Alpha slang

For instance, if you've been out-maneuvered by another trader, you've been "mogged." A "rulescuck" is someone who is a stickler for betting market rules and may try to win on a technicality.

In 2024, 74% of homebuyers took out a mortgage

Debt owed on mortgages made up about 70% of US consumer debt as of 2025. Mortgage collateral ensures the lender isn’t at a complete loss if the borrower defaults. Under most mortgage contracts, the property is considered collateral under the loan. This means that if a borrower doesn’t repay the loan, then the lender can seize their property.

A short squeeze happens when short sellers increase stock prices by buying shares back quickly

When short sellers realize their positions may be incorrect—usually triggered by increasing share prices—they often try to quickly buy back their shares in order to minimize their total losses. When this happens on a large scale, that buying activity can drastically increase to represent the seemingly high demand for that stock. The result is called a "short squeeze," which refers to short sellers literally being squeezed out of their positions by rising prices.

The bond market is where bonds and other debt securities are traded

Bonds are fixed-income investments allowing individuals to lend a specific amount of money to a large entity, like a government or corporation, for a set amount of time in return for interest paid out over the life of the loan. The bond market is widely considered a key economic barometer.

Many hedge funds use short selling as an alternative investment strategy to offset risk

Hedge funds typically use a "long-short" investment strategy—where funds diversify by investing in a mix of long positions and short positions—to balance risk and maximize profits. Including short positions gives hedge funds some protection against downturns in the market, although the strategy can have uncapped losses for investors.

A 'debt trap' refers to the need for loans or credit to cover the expenses incurred from other debt

Debt traps can be caused by unforeseen expenses or inadequate savings and can be a brutal cycle to break. At the end of 2025, total household debt in the US reached $18.8T, according to data from the Federal Reserve of New York.

A 'position' in financial markets refers to the amount of a security or asset that an investor owns or sells short

A "long" position gains from an increase in a security's price, whereas a "short" position profits from a price drop. This article includes a detailed explanation of the term "position" as it relates to investing and financial markets.

Commodity traders are most commonly 'hedgers' or 'speculators'

While hedgers often produce and consume physical commodities (like corn, copper, or natural gas) and use the markets to manage the price risk for those commodities, speculators provide liquidity by betting on commodity price changes.

Some experts and investors think short selling—a strategy in which investors bet that a stock will drop in value—helps keep the market healthy.

Watch Margot Robbie explain subprime mortgages—risky loans given to homebuyers with low credit scores or no income verification.

Refinancing a mortgage is when a homeowner exchanges their current loan for a new one

Homeowners typically refinance to secure a lower interest rate and potentially a new loan term length. Debt owed on mortgages made up about 70% of US consumer debt as of 2025.

Mortgages are loans used to buy property

A mortgage is a loan used to buy property, like a house. Borrowers typically put down a percentage of the cost of the home, and the amount left over is financed through a lender, like a bank.

To continue selling mortgages, agencies that determine how risky a loan is gave high ratings to homebuyers regardless of their actual risk portfolio.

Pioneered by JPMorgan, credit default swaps are a form of financial derivatives that act as insurance policies for banks issuing assets created with risky loans.

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What are repurchasing agreements?

Repurchasing agreements are short-term trade agreements in which a dealer sells securities and agrees to repurchase them at a higher price soon after (often within 1 to 2 days). This gives dealers quick access to cash and allows the purchasing party, often the Federal Reserve, to control liquidity in securities. This can be used to alter the money supply, which is a key element in combating deflation.

Commodity trading is regulated by the CFTC to mitigate fraud and risk

Established in 1974, the CFTC regulates these markets (including swaps, futures, and certain types of options) to protect market participants from fraud, ensure fair trading conditions, and generally reduce financial risk.

Mortgage insurance offers help to buyers who can’t afford to put down 20% up front

Buyers who need mortgage insurance end up paying more per month on top of their loan to cover the added insurance. At its core, mortgage insurance helps buyers purchase a home they can’t afford, letting them put down 20%, while protecting lenders offering potentially risky loans.

The US debt ceiling is the threshold Congress sets for federal borrowing.

Retail investors are getting burned by long/short strategies

In the US, many retail investors lack the SEC-mandated status (a high enough net worth, income, and other factors) to directly invest in hedge funds. The regulator considers hedge funds too risky for the masses. Hedge fund-like strategies have emerged as a workaround, despite potential pitfalls.

The word 'mortgage' comes from medieval French, meaning 'death contract.'

Insider trading is the practice of trading a company's securities based on material, nonpublic information.

Read about why bans on short selling are a controversial policy

Generally, short selling is legal, but regulations often restrict short positions when a stock has experienced a sharp price decline (more than 10% in one day). However, negative feedback loops in times of financial crisis have given short selling a bad reputation. The government has temporarily banned short selling during previous market downturns—like The Great Recession of 2008 and the early months of the COVID-19 pandemic—but experts argue whether those bans actually improved market stability or just distorted prices.

How exchanges like the Chicago Mercantile act as trading referees

Chicago's Mercantile Exchange emphasizes futures contracts on commodities. This podcast episode breaks down how exchanges actually work, make money, and streamline the market.

Hedge funds make money from imposing steep fees on investors, as well as from investment performance

Hedge funds often operate on a "2 and 20" model: Investors pay fund managers a 2% management fee, and the hedge fund keeps 20% of their profits. (The 2% is imposed annually, irrespective of performance.) Hedge funds are known for chasing big returns—and taking big risks to get them. This explainer not only breaks down how they work in detail, but also the strategy first introduced in 1949 that still shapes hedge fund investing today.

Futures contracts—which are agreements to buy or sell a standardized asset at a specific future time—are the primary way commodities are bought and sold.

40 key stock market terms, explained

Liquidity. Forex. Capitalization. Blue chip stocks. These are just a few pieces of stock market vocabulary most people who don't spend all day on a trading floor might not know. Thankfully, we found a fun infographic that makes it easier to learn what 40 key stock market terms mean and why each of them matters.

Stock options give investors the right to buy or sell a stock at an agreed-upon price and date

There are two types of options: calls, which are bets that a stock will rise (or not rise past a certain point), and puts, bets that a stock will fall (or not fall past a specific level). While stock options give investors the right to do these trades, they do not obligate buyers to follow through with them—sellers, on the other hand, must perform the option if it is exercised

Credit limits can be lowered as well as increased

Some common reasons for someone's credit limit being lowered include missed payments, an inactive account, and more.

Spot markets are where commodities intended for relatively immediate delivery are traded

Spot markets are where physical securities are exchanged for cash. Also known as cash markets or physical markets, the trades are relatively immediate—both parties agree to an immediate transfer. Currencies and securities can also be traded on spot markets.

When the US hits the debt ceiling, the Treasury uses emergency measures to avoid default

After the US reached its debt ceiling in January 2023, the Treasury deployed "extraordinary measures" to keep paying obligations. This article explains the steps, how they work, and why they last only for a limited time. (Some readers may experience a paywall.)

Since the 1990s, banks have sold some of the credit risk of their accounts to external investors, known as SRTs, or synthetic risk transfers

This means if the account defaults, the outside investors assume most of the risk in return for some regular payments, freeing up the bank's ledger. It is a form of insurance used by banks to allow them to free up capital. In 2024, nearly $100B worth of SRT notes were sold.

The price of a mutual fund is based on its net asset value (or NAV).

Escrow is when a third party holds on to the money during a financial negotiation between two other parties

In the homebuying process, escrow typically happens while the buyer and the seller negotiate the terms of the sale. Escrow accounts can also be used to hold a buyer’s money when making payments on their loan.

Use a prediction market profit or loss calculator

In order to calculate how much someone would make from a specific trade on a prediction market, this calculator asks for the purchase price of a given "yes" or "no" prediction, the number of contracts the trader plans to purchase, and more.

Paying a fee to delay paying back a loan in full is called 'rolling over' the loan

Borrowers sometimes roll over loans when they aren't able to pay back the full principal balance and accrued interest. A rollover extends the amount of time the borrower has to repay the loan, but does not decrease the amount of money the borrower has to pay back.

Futures contracts are agreements to buy or sell a standardized asset at a specific future time

When it comes to commodity trading, these legally binding agreements tend to operate on a monthly basis. Futures contracts are typically traded on futures exchanges, like those operated by CME Group and the Intercontinental Exchange.

Who is Michael Burry?

Michael Burry is best known for shorting the mortgage bond market in 2007. Before the Great Recession, the legendary investor’s firm took a stake in GameStop and argued the company was being undervalued in 2019. Learn more about Burry’s historical impact on markets here.

Watch Selena Gomez explain collateralized debt obligations in a clip from 'The Big Short.'

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Bear raiding is a manipulative tactic to bring a stock price down—and part of why short selling can be controversial

Bear raids occur when short sellers use manipulative tactics—like spreading false rumors or coordinating trades—to artificially drive down a stock's price and profit from short positions. Although bear raids are an illegal form of market manipulation, they can spook investors, prompting large selloffs of shares and causing a company's value to plummet. As a result, investors may be hesitant to invest in the company in the future, creating a feedback loop of stock downturn.

The shadow banking system is a group of intermediaries that operate outside of normal banking regulations

The nonbank financial intermediaries that make up the shadow banking system legally provide services that are similar to those of traditional commercial banks. Although the term isn't used as often as it once was, private credit firms are technically part of the shadow banking system, as are hedge funds, payday lenders, buy now, pay later companies, and more.

Investing in bonds comes with a few risks

Think: changes in interest rates that impact the bond’s value, or a bond issuer completely defaulting on a loan. There are steps investors can take to lower their initial and future risk when investing in the bond market, such as checking a company's bond rating before investing.

Retail investors are not professionals—they invest their own money

For retail investors, the stakes may seem higher and more personal. Critics say that this dynamic means that retail investors are more susceptible to behavioral biases that could lead them to make poor decisions when it comes to buying and selling assets. For instance, fear of missing out could cause a retail investor to buy a stock that is popular but not a financially worthy investment.

Watch a breakdown of 'The Volcker Rule,' which stopped banks from being able to make trades with client money and is one of the most controversial financial regulations to date.

Investors trading their municipal bonds can't use the same method to purchase them

Instead, they’ll have to go through the secondary market, which has its own set of rules and steps to follow. An illustrated, explanatory video can help you learn how to sell your municipal bonds for the best market value.

Prediction markets—the platforms where users can trade bets that pay out depending on certain event outcomes—have faced questions about insider trading.