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Let's say it's the week of Thanksgiving and you just bought a 20-pound fresh turkey for say $3 a pound, so you paid $60 total.

You and your family then get invited to somebody else's house for Thanksgiving and they already have a turkey. So I offer to take the turkey off your hands, promising to buy you another 20-lb turkey for your Christmas dinner. I then quickly turn around and sell that turkey to my sister-in-law for the $60.

Four weeks later, a 20-pound turkey can be had for $2.50 a pound - $50 total. So I just replaced the turkey I borrowed for a $10 profit.

But let's say that fresh turkeys become scarce and the price on them jumps to $5 a pound. Now I have to pay $100 to replace that turkey and I'm out $40.

Now consider a crazy scenario in which the price of a fresh turkey went to $500 a pound. That's kind of what happened to those hedge fund people who now find themselves in position of having to buy a whole bunch of overpriced fresh turkeys in order to return what they borrowed.

Yeah, but with the time value of money, and factoring in a high discount rate, a month later your loss may only be $420.00 or so.

Or if they soy crop is good, just buy them a tofurky. Maybe they won’t notice.

You forget the naked short thing. You , Mr Turkey Hedge Fund who is sleeping with the butchers wife, sold 100% of turkeys on earth, and for good measure sold 40% more imaginary turkeys and now you have to come up with 140% of all turkeys on earth which a 5 year old understands is impossible. The butcher found out about your sale and is “plucking” you hard insisting you deliver those turkeys and his wife trying to help you by stealing his turkeys and giving them to you under the table.

Turkey......

Perfect explanation! lol

This is a really good example you laid out here.

Now consider a crazy scenario in which the price of a fresh turkey went to $500 a pound. That's kind of what happened to those hedge fund people who now find themselves in position of having to buy a whole bunch of overpriced fresh turkeys in order to return what they borrowed.

To finish your example, I think this is where the small investors on Reddit came into the picture.

The hedge funds were hoping for Game Stop shares to drop very low, so they could make a sweet profit from their short-sales. The small-time Reddit investors caught wind of the hedge funds trying to drive down Game Stop, but Reddit came in and bought up the stock (going in the exact opposite direction the hedge fund needed.)

Many of the hedge funds leveraged their short sales, so their losses went into the billions.