LogFAQs > #949962114

GTM posted...

as someone who knows nothing about this, can someone explain what shorting is and how <whoever is losing money> is losing money or getting bankrupt when the stock kept getting higher and higher?

Short selling is a way to bet on a security losing value. The basic idea is:

1. Borrow shares of a company from someone
2. Sell those shares
3. Buy the shares back later at a lower price
4. Return the shares

So if you sell those shares for $100, then buy them back later at $60, you made $40, minus the interest.

edit: to answer the second part of the question, if the stock goes up instead, you have to buy it back at a higher price and you lose money.

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At least your mother tipped well