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How does shorting inherently help a commodity approach its "correct" value more rapidly?
by indubitable 9y ago
How does shorting inherently help a commodity approach its "correct" value more rapidly?
- tfolbrecht 9y agoPerforming a short is a sort of counter to to-the-moon talk. If you look at the mechanistic properties and costs associated with shorting, you can see how far the person buying the short thinks the value is from open market value. If you were to bet against the sun rising tomorrow, the market would "bet" to the contrary and the short would be cheap and accessible. It's not craps gambling, it's like betting on a boxing match. The bookie odds are based on previous records and some valuation model, you only come out ahead in the long if you have a superior valuation model, insider knowledge, luck, etc.