I just cannot, for the life of me, understand how you make a profit by it.
In: Economics
With stocks, you can sell a stock that you have borrowed from someone. This is usually not the case with common items we borrow or rent.
But imagine that renting and selling real estate was like stocks:
You believe a hurricane is coming to an island. You then rent a room for $1 at a building there and immediately sell the room for a good price, say $20. The hurricane comes and the room selling price drops dramatically. You then repurchase the room at a low price, say $10, and return the room. You just made – 1 + 20 – 10 = $9
If the hurricane never came, and perhaps the island continued to prosper, you would have to buy the room back at say $30. And thus lose money: -1+20-30= -$11
When short selling, you are betting on the tanking of a stock.
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