Selling short carries much, much more risk than a simple purchase-and-sale. Put simply: if I buy a stock, the most money I can lose is the principal I put in (

Selling short carries much, much more risk than a simple purchase-and-sale. Put simply: if I buy a stock, the most money I can lose is the principal I put in (a stock can’t drop past zero), and any losses I take don’t damage others. In the case of a short sale, my potential losses are limitless (while a stock can’t drop past zero, there’s no potential ceiling), and the party lending their stock may lose out if I’m unable to cover a call.