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
All investment is gambling. No exceptions.
To short a stock, you make an agreement with someone that you WILL sell them some stock at the market price, and then buy it back from them after a bit, also at market price.
They are betting the stock price will go up, and then you will still have to buy it from them, but at a higher price than they paid you.
You are betting it will go down, meaning you can buy it back for cheeper than you sold it.
Its high risk though, because if the stock goes up 1000%, you have to pay out at 1000%, but if the value of the stock drops to 0% you pocket the whole initial purchase. so the amount you can loose is unbounded, buy not the amount you can gain.
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