A contract to sell, for future delivery, goods or securities in excess of the amount a firm or individual actually holds. The holder of a short position relies on eventually being able to produce or buy sufficient goods or securities to be able to fulfil the contract, or to enter a reversing trade. When the time for delivery arrives, if spot market prices are lower than the contract price, the holder of the short position will be able to buy the goods at this lower price, and will make a profit. If the spot market price is higher than the price agreed in the contract, however, the result can be a loss, with no limit to its size. A short position is therefore risky with the potential for considerable loss. See also short selling.
Reference: Oxford Press Dictonary of Economics, 5th edt.