However the bet goes sour and the price starts to skyrocket because you are short the securities, meaning you never owned them, you have to buy them back. So let's say, using your own eligible securities as collateral, borrow an eff load of cash and used that to 'sell short' a security you don't own. If the bet isn’t going your way, well then the person that lent you the money sees the value of their collateral depreciating and have the ability to force you to exit the trade, even if you don’t want to.sounds scary right, stock market shylock coming to bust up your holdings if you can't make good. My dad used to say, Neither a borrower nor a lender be, and he was right because the process is further compounded with complications if you’ve borrowed money to bet against the security.

On the other hand, if you wager incorrectly and the stock goes up your losses can be infinite as the stock can continue to go up.

If you bet correctly you can only make 100% of the current stock value as a maximum or shorting it into the ground, the ground being $0.00. If you’re wrong and prices actually rise, you’re going to lose money because you will have to buy the Securities back at a higher price than you sold them for earlier. It may sound tricky, I know, but essentially the process is selling high and buying low, instead of buying low and selling high. If you bet right and prices fall, then you can buy them back at a lower price, or you can return the securities that you borrowed and pocket the difference as profit. To facilitate this short sale, you would have to borrow the shares to 'sell short' from someone else. One way to express your opinion is to 'sell short' META, which means that you sell the security without actually owning any. But what's the basic working of a short squeeze? is it as simple as people just buying and holding? Well, no.Let’s just say that you're a hedge fund and are of the opinion that no one knows what META is/does and bet that the price will fall (betting against the current price of the holding when one opens the short position). There has been a lot of hype around short squeezes lately, there are even squeeze chasers like in Twister.dangerously bouncing from holding to holding looking for the next thrill. Furthermore I am invested into MMAT and therefore there is the potential for bias.Ī guy squeezing an orange Let's start with what makes a short squeeze so special.

Nothing in this article is advice and I am not a financial advisor, any views and/or ideas expressed in this article are my opinions. This is copy pasted from telegram, that's where I publish my writing.

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