When someone shorts a stock, they are always borrowing the share from someone else, usually a broker. Here, you can immediately see that short-selling has an asymmetrical downside: the most you can "win" is 100% of your money, but your losses can theoretically be infinite, if your stock just keeps going up. If you buy back the shares when the stock is up, you would lose the difference. Now imagine the stock price doesn't drop, as you anticipate, but instead goes up. You'd walk away with the difference, minus brokerage fees. ![]() In essence, short selling is borrowing a stock you don't own from someone else, immediately selling the share of stock you don't own, and then waiting to buy the stock back, hopefully for less than you bought it for initially. Is it all so cut-and-dried? I don't think so, and here's why.
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