That's not the way it works. Shorting dilutes a stock supply by selling shares that you do not own. The deal is, you have to buy those shares at some point. This is called covering. You sell first, then buy. Confusing? Well, to top it off, the shares that you sell short are not included in the total shares issued. This dilutes the stock supply to make it even harder for the share price to go up. Almost not fair, huh?
However, if a stock starts heading upward, people who have sold short must cover (buy those shares), or lose a lot of money. Say if you short IOM at right now at 17, and if the price heads up to 25, you have just lost a lot of of money if you buy to cover at 25. Again, if you short IOM at 17, and the price goes down to 10, you will put that $7 difference in your pocket if you buy to cover at 10. |
