Because a short has a hard limit on the possible gain (the amount you got when selling minus the borrowing cost, if you can buy it back at zero when you have to

Because a short has a hard limit on the possible gain (the amount you got when selling minus the borrowing cost, if you can buy it back at zero when you have to return the stock), but no limit on possible losses (if there is a rally or a short squeeze and the price at which you have to buy it back is ten or hundred times of what you sold it for). This is especially nasty if your trade partner knows you have shorted 40% of the traded stock and he controls 61%: he can demand any price he wants for the 1% you must buy from him to fulfill your side of the trade. http://www.nytimes.com/2008/10/30/business/worldbusiness/30iht-norris31.1.17372644.html?pagewanted=all http://www.nytimes.com/2008/10/30/business/worldbusiness/30i...