[freedomjusticeruleoflaw]

When you sell short you borrow stocks from a broker for a fee. You have to return those stocks within a month. You take those stocks that you BORROWED AND SELL THEM ON THE MARKET.
Let’s say they sell for $100 per share. You are BETTING THAT IN THAT MONTH they will drop to $50 per share. YOU BUY THEM BACK AT $50 per share and keep the $50 profit, RETURN THE STOCKS TO THE BROKER MINUS A FEE... You made $40 (just an estimate) per share.

The problem for the highly leveraged short sellers is that they MUST RETURN THE STOCK SO THEY HAVE TO BUY THE STOCK BACK AT THE END OF THE MONTH SO IF THE STOCK GOES UP... they are screwed.

[central_va]

The problem is the brokerage house only pretends to have the stock in inventory to “loan” the short seller. It is fraud all the way around.

[\/\/ayne]

Seems like the Reddit chat group threw a monkey wrench into the corrupt system by getting a lot of people to buy stocks that have been short sold. The short-selling corrupt people are then stuck and can't make a profit, in fact they lose a lot.

The part I don't understand is how they get people to buy a stock. I guess it doesn't matter, they did get the job done.

[BobL]

“You have to return those stocks within a month”

Are you sure about the month? I’ve done shorts, but don’t remember having to buy-to-cover for much longer than a month. I do get it with margin calls, and having to pump money in if you’re losing your shirt.

On the other hand my stocks were drifting down after I shorted them, and then they crashed (they were Financials going into 2008), so I was always positive.

[Kenny500c]

Naked short selling is the problem. This is what retail investors are attacking.

Investment houses can sell unlimited amount of stock depressing the price of a companies stock to the point of BK.
There is no requirement to return borrowed stock within a month, because no stock has been borrowed.