Chapter 05 · Section 5.1
Hedging Short Positions
A short position in the underlying implies in case of falling prices:
a) A profit potential of up to the price at which the asset was sold.
b) Unlimited loss potential.
The term "short" indicates a liability.
If you know you will have to make a payment in dollars in two months, you are short dollars. At some time during this period you know will have to cover your short position.