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Short sellers provide liquidity to the market by providing purchasable shares in an equity when none might exist. Short selling does NOT provide infinite market
by bluedevil2k 6y ago
Short sellers provide liquidity to the market by providing purchasable shares in an equity when none might exist. Short selling does NOT provide infinite market gambling. Short selling is incredibly risky with an unlimited downside, these types of investors can lose all their money and then some pretty easily. Short sellers in Tesla over the years have bled huge losses. "The markets can remain irrational longer than you can remain solvent." (Keynes) is appropriate here, as stocks like Tesla continue to climb the short sellers keep having to infuse cash to cover the mark-to-market prices. Eventually, they run out of cash.
- thrill 6y agoNot quite. Short sellers have to "borrow" shares from your broker, who is on the hook to replace them if the short seller cannot.
- bluedevil2k 6y agoEven more clarification, they loan the shares to the short seller from individual brokerage accounts without most of those individuals even knowing.