I understand that it means betting against a company’s future prosperity in value.
But why is that a thing?
How does it actually work?
Who are you buying from/selling to, when you practice this?
Sounds more similar to gambling than to constructive investment.
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In: 9
I think the value of a company (it’s share price) will go down.
I borrow 10 shares in the company worth $50 a share from my friend and tell him I’ll give him his shares back in 1 month.
I immediately sell all his shares and pocket $500 (10 x $50). A week later, the companies value goes down and shares are now $35 each.
I buy 10 shares for $350 and then give the 10 shares back to the friend I borrowed them from.
I just made $150 profit ‘shorting’ the stock.
The main risk is that if the share price goes *up* then you will lose money. If I sell his shares for $50 each and then the price goes up to $60, I will lose $100 re-buying the shares to return to my friend.
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