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Technology Stocks : Xpedior Incorporated (XPDR)
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To: Dave Kahn who wrote (106)3/9/2000 12:09:00 PM
From: Marty R   of 132
 
I'm not an expert but here's my brief understanding of shorting stock.

Let's say stock's at $20 - people assume it's going lower - and short it (sell shares they don't own) ... if there's enough short (selling) the price can move down more rapidly then it already may have been.

Perhaps stock goes lower- perhaps at $17 - maybe there's news or buying for other reason - for whatever reason the shorts need to cover their position (of borrowed shares). So they buy. Stock goes up.

If news hits and the stock price goes up rapidly then there can be what's called a short squeeze. Like if they shorted at $20 (sold) but stock goes up on them (either right away or there's a quick bounce off base price). Now shorts have to scurry so they're not buying at more than $20 to replace borrowed shares. Or they're trying to maximize your gain between (for example)
short/cover=gain
$20 / $17 = $3
vs.
$20 / $19 = $1

Hope my explanation makes sense
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