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ShadowGLI8 karma

You mention in your article that Shorts can (in theory) be used to bring a company stock back in line for fraud or overvaluation but has itself been shown to be a tool for abuse and fraud.

At the end of the day, besides lining the pockets of those already vested in the market, is there any real economic value to having shorts even be an option? It seems like so many “Wall Street” financial methods, they are just skimming money off the top of other peoples money without putting their own skin on the line.

Edit for Clarity: Imagining stock A is valued at $10, they borrow and sell at $10, buy it back 90 days from now at $7 and return the share while pocketing a $3 (30%) cut.

ELI5; what benefit to the company, shareholders or the economy did that short option provide. Other than putting $3 in the hedge funds ledger

ShadowGLI3 karma

I’m asking what is the value for shorts. IE, the right for a broker to borrow and subsequently sell (without ownership) a stock and pocket a cut.

Imagining stock A is valued at $10, they borrow and sell at $10, buy it back 90 days from now at $7 and return the share while pocketing a $3 (30%) cut.

ELI5; what benefit to the company, shareholders or the economy did that short option provide.

Seems like a legal scam to incentivize a company to fail for the benefit of portfolio owners and that money does not come from nowhere, these guys are seemingly siphoning money out of a company and out of shareholders pockets. Again unless I’m missing something wildly, hence my question as to what value for shorts even have outside of a theoretical “balancing”.

ShadowGLI2 karma

Thank you for articulating what I had trouble doing. And for taking the time to actually answer my question rather than soap boxing like some of the subsequent comments on here.