mfw i learning what a hedgefund and shorting is after 4 coffee at 6am
(media.patriots.win)
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I still don't understand it. Wouldn't it be more like borrowing a fren's car then driving 150,000 miles on it and trashing when you return the car? If I'm understanding what you're saying, is you're borrowing something worth X, selling it, then buying it back at a cheaper price and giving it back but not worth less than X?
OK, le's have a more close to a real world example. AMZN market price is $3000
Ok, I think I'm starting to understand it. So from the stock owner's perspective, who is playing the long game or using the interest, you loan HF 1000 shares of AMZN, HF sells shares, AMZN price goes down, HF buys 1000 shares and returns it to the stock owner. So the stock owner is no better or worse off because even if he didn't loan out the shares, he still would have lost value due to price drop. Am I getting that? Also, appreciate the explanation for this stonk illiterate pede.
Yes. For the stock owner it doesn't matter.
The stock owner doesn't even know he lends shares except broker pays him a commission that comes from the short seller, after some broker cut, of course. It's usually tied to the one of the FED interbank overnight rates. But this commission actually can be very high is the stock is heavily shorted and is in demand.
So if the commission is high, the short seller accumulates losses via commission accruals even if the stock doesn't move down as he expects.
Yeah, it's a complicated mess :)