fncceo
Diamond Member
- Nov 29, 2016
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You can't short more stock than is available which is what was happening here.
It's not just illegal, it's impossible. You can't sell more of a stock than actually exists.
And yet that is what was happening. If it was impossible it wouldn't have had to been made illegal.
Read the article, that isn't what's happening. You don't understand how "shorting a stock" works.
You can only make money shorting a stock if you physically have stock you can sell.
Naked Shorting is Illegal: So How the Hell was GameStop 140% Short?
There are a fixed number of shares for every publicly traded company. Some of those shares are reserve (cannot be traded). Of the rest outstanding shares, some of those shares (most in fact) are long, not for sale at the current market rate.
You cannot borrow and sell more shares that their are outstanding in the market.
A trader could 'borrow' some shares from another trader and immediately sell them back and borrow them again. However, for a deal to be legitimate (and for the original trader to make a profit) ALL of the borrowed stock has to repurchased at the lower price and returned to the lending trader.
If there is no intention to return the borrowed stock that is not shortselling. That isn't even corruption (corruption expects to make a gain) that is just stupidity. There is no way to make a profit from that -- that is defrauding the market.
Nope. It's using the rules to an advantage.
Please explain the advantage? If you can't return the borrowed stock, you commit fraud and go to jail (or get a fine). How is that an advantage?