4 ms·

I get how this works but it still doesn't make sense on why i should be able to lend shares that i don't own. The whole idea of shorts in general is kind of mes

• mikeyouse 6y ago
  You don’t only make money if the company fails, but if the market thinks it’s going to succeed at a faster pace than it eventually does. You’re not betting against the company, but the market’s opinion of the company. The alternative to allowing shorting is to only allow stocks to increase in price which is obviously silly.
  • RhodoGSA 6y ago
    Okay, Failure might not have been the right word. Also, my main point was in regard to shorting on borrowed shares. If i'm short a company on borrowed shares I should not be able to further lend those shares out for a short. But to my secondary point, which seems to be getting the most attention I can only say this. In a pure, utopian world it would be immoral for me to have a vested interest in a company 'Underperforming'. Without Shorting you would not have 'Only an increase in price' - thats silly. There would still be the option to sell your shares and since market dynamics dictates the price of those shares they can potentially fall to zero, thus losing money and if the shares fall enough, you could default on your credit, etc. This mechanism has the same protects a short has against fraud, mismanagement, etc. The difference here isn't just semantics. If i don't believe in a company, i sell my shares thus lowering the value of the shares (If the market agrees).