A unique risk associated with short selling is the potential for unlimited loss. When a short seller borrows and sells a security in anticipation of its price falling, they must later buy it back to return it to the lender. If the security's price rises instead of falling, there is no theoretical limit to how high the price can go, leading to unlimited losses for the short seller.
This differs from long positions, where the maximum loss is limited to the initial investment amount.
Study Document References:
* Volume 1, Chapter 9:Short Margin Accounts, including the mechanics and risks of short selling.