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Selling short can be harmful for a company, since brokers are allowed to lend up to 100% of a company's shares, effectively doubling available supply which can
by 3pt14159 10y ago
Selling short can be harmful for a company, since brokers are allowed to lend up to 100% of a company's shares, effectively doubling available supply which can put downward pressure on cash raises through further raises through the creation of additional stock, but buying put options is just an advanced form of side bets which has almost no negative consequences to the company in question.
- JumpCrisscross 10y ago> buying put options is just an advanced form of side bets Option dealers dynamically hedge. For each put sold they (a) buy a call and short the stock, (b) buy a put or (c) sell some fraction of the stock.
- 3pt14159 10y agoI'm aware, it's why I followed it up with: > has almost no negative consequences to the company in question. The reality is, of course, not so simple, but the general idea is manifested differently on the strike price of course and I didn't want to get buried in detail. The fact remains that even if the stock was 100% short sold, buying additional puts can still tank the stock due to market dynamics, but it isn't wrong to say that buying puts has less impact than selling short.