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what is short selling of stocks ?
short selling is a process where you sell a stock at a higher price and then buy it back later at a lower price
how does it work ?
basically – a rich party ( with lots of money ) first sells the stock
then slowly starts releasing negative news in the media about that stock
the people who are holding that stock slowly start selling and getting out – the price keeps reducing
this has a cascade effect – people suffer losses now and want to reduce the losses , so more retailers sell
so at a particular point , when the rich party has had enough , they buy back the stock at a low price and pocket the profits
they might pay off the regulator as well to keep quiet ( a certain percentage – let’s call it cost of doing business 🙂 )
elon musk (ceo of tesla) said :
you cannot sell a home you don’t own
you cannot sell a car you don’t own
then why is selling stock that you don’t own allowed ? it is because the stock market regulator has formed the rules and they make tons of money shorting
he calls the usa sec ( securities and exchange commission ) – the stocks regulatory body in usa as short sellers exchange commission 🙂
also the exchanges regularly short the stocks – they are all in co-hoots ( in a group ) to make money
here is an excerpt from an article in the news