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So What Is Short Selling? An Explainer

NPR – “By now, you’ve probably heard that an army of amateur investors ganged up on short sellers, causing them painful losses while sending shares of the beleaguered retailer GameStop soaring. You also may be asking, OK, but what is short selling? Short selling has nothing to do with summer wear or workout gear. It’s a common but controversial way of trading in financial markets. Let’s say an investor decides a company’s share price is overvalued and likely to fall. Markets provide a way to make that bet. The investor borrows shares of the company, normally from a broker. The short seller then quickly sells the borrowed shares into the market and hopes that the shares will fall in price. If the share prices do indeed fall, then the investor buys those same shares back at a lower price. The short seller then returns the shares to the lender and makes a profit by pocketing the difference…”

See also Barrons’ – The GameStop Revolt Has Just Begun. Get Ready.

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