I wish I could understand what you are dicussibng.
Is there any way it can be explained so am elderly person who does understand short selling or I guess buying.
I means, to me, one just bets weather a stock is going up or down, you are in reality just betting. like gambling. Please try to explain it so I will at least have a general idea.
selling short means selling shares you don't own, that someone has lent you. That is generally a speculative position although one can imagine times when it would be hedging to do so. The shares must either be delivered or repurchased to close out the short position.
naked short selling means this is done without any clothes on. ha ha -- just kidding. naked short selling means that you haven't borrowed the shares you're selling short. that is fraudulent and is not a new activity.
Short selling itself if basically the practice of borrowing someones shares, selling them, then later buying them back and returning them to the original owner. When you do this (selling before buying) you make money when the price of the stocks goes DOWN (you buy it back for less than you sold it for).
Apparently this "naked" short selling is not borrowing to begin with, but somehow counterfeiting the shares. This *must* the effect of diluting the value of the stock, and also results in much higher shorts on the stock. Since short sells are votes of 'no confidence' in the stock, any short selling must have the effect of reduducing the value of the stock.
If the value is reduce enough the company goes kaput (when it should not have). The investors lose all their money while the short sellers can raclaim the shares for probably tenths of pennies on the dollar.
That's my take on all this.
"He that sells what isn't *his'n*, buys it back or goes to prison."
... that's how I was taught (about short selling - naked or otherwise) back in the day.