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The easiest way to think of a short is by understanding what it actually is. You DO NOT "buy a short". Short is a verb. It means to sell. More specifically it means to sell something you don't own. How do you sell something you don't own? By promising to buy it back later no matter what the price is. If you buy a stock or short a stock profit calculation is the same. Sell price minus buy price. The difference is when you short you get the sell price first. So if you short a stock at $20, and it pays out at $100 (you buy it back at 100), $20 - $100 = - $80. You lose $80. If it doesn't pay out (you buy it back at 0), $20 - $0 = $20. Another important difference to keep in mind is that when you BUY you can only LOSE as much as you put in, while when you SHORT you can only GAIN as much as you put in.