So you borrow a share of a stock from someone, promising to pay them back the shares and a little fee for them not having their shares available. You turn around and immediately sell their share. Let’s say the share was worth 100$, so you pocket that. You anticipate the stock dropping to 80, and if you’re right, when that happens you buy a stock of that company later and then give that stock to the guy you borrowed it from. You make 20$, pay that little fee, and go about your day.

If it doesn’t hit your target though, at some point you decide to cut your losses, since the fees associated with not giving back the stock are prohibitively high by design. If the share stayed at 100$, you just lose that little fee. If its 150$, you paid the fee and 50$.

You always buy a stock later, but shorting weakens a stock because you sold first and that reflects in the stocks price, potentially triggering other sales.

If you wanna say “ive never bought truth social stock” you can’t short, although you can still say “I’ve never invested in truth social”.

Whoever actually owns the stock and whoever you sold it to both benefit from the stock increase. Basically, everyone wins except the one shorting.

Welcome to the whacky world of derivatives, Squid. The Big Short movie explains shorting stock pretty well while also covering how the 2008 financial crisis happened. Pretty good movie imho.

You do have to pay for it, yes.

So here’s how you get money out of shorts:

• You have 0 dollars. Let’s assume DJT costs 1 dollar now.
• You borrow 100 DJT at 1 dollar, and immediately sell it. You have 100 dollars, and owe 100 DJT to the lender.
• DJT goes to 50 cents.
• You buy 100 DJT at 50 cents, and pay your debt back. You now have 50 dollars and 0 DJT.

The point is similar to normal (long) trading, except you sell high first and buy low instead of normally buying low first and then selling high. You take a loan (in stock) to cover the intermediate time.

And why is this bad for the stock value:

• Let’s assume there are 500 DJT in existence on the market, all at your broker.
• You borrow 100 DJT. There is now 600 DJT in existence, 500 at your broker (they still have an IOU for the 100) and 100 with you.
• You sell the 100 DJT on the market. The value of DJT goes down, since it effectively undergoes inflation.

So the question you might have is why does the broker say it has 500 after it has lent out 500. The answer in short (no pun intended) is they make the rules, literally. The stock market, the SEC, all of that is just financial institutions governing themselves, with very little government oversight. The SEC is literally the biggest banks on Wall Street, because the government says they are the only ones smart enough to police themselves.

If this resembles fractional reserve banking, it’s because it’s exactly the same principle. If you don’t know what that is, it’s just banks doing the same “it exists both here and there” thing with loans, causing inflation of currency.

And if you question “well isn’t this just an infinite money glitch, why don’t they do it infinitely?”, there are some limits on having to keep some reserves to prevent bank runs. That said, this market is 100 times as big as the world’s combined yearly GDP, so you might wonder how effective those rules are.