> who do you make money from?<p>When you own stock at a broker in a margin account, you may sign an agreement to allow the broker to lend out your stock to someone else. For lending your stock, you are entitled to a stock-borrow fee which usually is quite small say 0.25%, and paid by the borrower (short-seller). The borrower then sells the stock to someone else. At a later point, the short seller closes their position by buying it back, and returning it to you. This is roughly the mechanics of it. So, to answer your question, the short seller makes money from folks who buy high and sell low. In this specific example, the stock-borrow fee say was 5% because, the float is still low, and if the short seller borrowed at $165 after the IPO and sold it, and then bought it back at $135 and closed their position, they made money from folks who bought at $165 and sold at $135.
Alice holds SpaceX stock and believes it will rise. Bob believes the stock will fall. Alice and Bob reach an agreement for Alice to "lend" their SpaceX stock to Bob for a small "fee". Bob immediately sells the SpaceX stock at the current market value. After some time Bob will buy back the sold SpaceX stock at the current market value (hopefully less than Bob sold it for) and return the "borrowed" SpaceX stock to Alice thereby fulfilling the original contract.<p>It's also possible Bob's thesis on SpaceX could have been wrong and the shares could skyrocket. There's usually a provision in the contract for Alice to recall the shares she lent to Bob. In this case, Bob would be forced to buy SpaceX stock at the current market value and likely lose money on the overall trade.<p>To answer your specific question, "Who do you make money from?" It's actually not clear. Bob selling-high and buying-low doesn't necessarily mean whom Bob sells-to and whom he buys-from are on losing sides of the trade despite Bob making a profit. E.g. the buyer of Bob's short-sell could write calls and the stock could close pass the strike on expiration and turn a small profit as well.
You essentially purchase a share into the stock from a random person and sell it immediately on the market at the current price with a promise to sell it future value in the future.<p>You don't actually take the money right away but a broker holds it for you.<p>Say Acme is worth 100$ today and you think it'll go down to 80$ in a week. You give the broker a small betting fee. So you give him 101$, he makes the purchase and holds the "position" for you.<p>During that week the price could do 2 things.<p>The Good Scenario: Price goes down to 80$. Broker buys the stock at 80$ and pockets a nice shiny 1$. You pocket 20$.<p>The Bad Scenario: Price goes up to 120$. Broker buys the stock at 120$ and pockets a nice shiny 1$. You owe broker 21$.<p>I say 1$ but it's actually more complicated than that. Some brokers allow you to do short positions only if you have other stock with them as collateral which they would sell to pay for whatever loss you might have. Shorting is a risky business because shares could go up to infinity and you could lose everything with these positions.<p>When people say they're "long on this stock" means they think it'll go up in price. "short on this stock" means they think it'll godown in price. It's lingo they love to use.<p>So the people you make it from are from people betting the opposite as you. Another person could make the opposite bet as you and end up losing their money that you pocket.
They're selling a borrowed stock, so any buyer on the market when you open the short position is where the money comes from. Short sellers get the money immediately and then pay fees to the people they borrowed from until they close the short position.
It's still just "buy low, sell high". You make the money from the same folks you normally would, only the order of when you buy and sell is swapped.
Someone who bought and expected to make a profit, but reached a point where they hit their stop loss or just wanted to get out the trade at any cost and couldn’t bear to wait longer. Quite possible a redditor who frequents r/wallstreetbets and YOLOed in.
Keep in mind that unlike purchasing a stock where the most amount of money you can lose is the amount of money you spend buying the stock (assuming you didn't buy it on margin), if you directly short a stock, there's technically no limit to the amount of money you could lose. If a stock goes up 1000% after you short it, then you could lose far more money than you put into it.
Normal sale - buy low, sell high, pocket the difference<p>Short selling - sell high, buy low, pocket the difference.<p>The money is coming from the same place in both cases - other people in the market.
Exactly the same people you'd make money from if you sold the stock high and bought it low (ending up with the same amount of the stock)
The buyer of your short sale would lose money to you. Remember options are contracts between two parties.<p>Shorters are selling to willing buyers at the current fair market price. So that they may survive.
The person you sold it to after borrowing it, who paid for it at the elevated price.
1) borrow the stock<p>2) sell it<p>3) rebuy it at the lower price (assuming you're right)<p>4) give it back to whomever you borrowed it from plus a consideration for letting you hold what's theirs for a bit<p>Whatever's left after you return the stock and pay the interest is your profit, which comes from the people who bought it from you in step 2. If you're wrong, and the price goes up, you have to replace the stock you borrowed at a higher price than you got for it and that's your loss (which could potentially be infinite, as opposed to long positions where you can only lose what you initially invested)
From people who bought the stock when you started to short.
The market just redistributes wealth from less informed players to more sophisticated/informed ones.
I wouldn't quite go that far. The fact that markets can remain irrational longer than participants can remain solvent means that participants with deeper pockets have an inherent advantage, even if they have less information. How quickly a random walk will take you to zero depends on how far above the baseline you start.
When you short a stock, you borrow shares from someone who is holding that stock and their broker gets money for lending the shares and sometimes the holder of the shares lent out gets money. You sell the shares, probably to a market maker. The cash is credited to your account and held as collateral.<p>Sometime later, the stock has fallen and you decide to close the position. You buy back the shares with the borrowed money probably from a market maker and close your position. You give the shares you borrowed back to the lender. Your net profit is sell_price - buy_price - borrow_fees, anything left is your profit.<p>Stocks are not zero sum like options or futures, they also have no expiration date (unlike derivatives), it’s possible a short seller sold shares to someone who later profited, and then it’s also possible to buy the shares from someone who profited, even if you made a profit on shorting the stock.<p>So the answer is “other market participants” who also may have profited on their buy or sell.
you borrow shares from a permabull and immediately sell them to whatever is buying<p>all you owe is the number of shares you sold, the original owner doesnt care what happened as long as they get identical ones back eventually. In the meantime, you pay interest on the initial value of what you borrowed and sold<p>You just sit on the cash<p>later when the shares are cheaper, you buy shares on the open market and give them back to the person you borrowed from<p>whatever cash is leftover from rebuying is your profit