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To: saxonjf
They “borrow” stocks from other people, sell them at a relatively higher price, then buy them back after they’ve tanked, give the stock back to the original owner with a fee, and keep the rest of the profit.

Yes, that's the idea. Sometimes they lose. But what is usually missing from the conversation and media stories is that they don't really "borrow a share" and sell it. That is just how it is ledgered on the trading desk books. But in fact, if your shares are borrowed by a short, the share never leave your book. What really happens (to put it in general terms) is that your shares are replaced with an IOU for shares; but your statement will still reflect that you own them. You can sell or trade or hedge the IOUs just like regular shares. The impact of this is that the actual supply of "shares" is increased by the number of IOUs.

So in a stock like GME the number of real shares is 100%, and if 100% of those were borrowed the number of shares plus IOUs available to trade is actually 200% of the numbers authorized and sold by the company. It only takes economics 101 to understand that shorting increases the supply of "shares", and that has a depressive effect on the price unless demand increases proportionally to the increase in supply. That is why shorts target particular stocks that seem to be on the rocks, or don't have massive street support, or are going through a difficult business cycle like GE has recently.

8 posted on 02/01/2021 10:33:42 AM PST by monkeyshine (live and let live is dead)
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To: monkeyshine

Bttt. Thanks


11 posted on 02/01/2021 10:43:40 AM PST by Track9 (English language instruction in china is sponsored by the CCP to facilitate espionage. )
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