gerg said:
Ah, I see. It sound strangely illegal, though. Then again, I know nothing about shares.
No, shorting is a perfectly normal, healthy market process.
When you buy a share, you pay money equal to the current value of the share. If the share value goes up, you can then sell it for the value of the share at that point, and you'll make more money than what you had to begin with. Buying shares necessarily raises the price of the share. If more volume is bought than sold, the price will go up.
When you short a share, you agree to buy a share at some point in the future, but take the cash value of the share NOW. If the share goes up, the amount of money you'll have to pay to buy the share you're
legally obligated to buy goes up, and so you will lose money. If the share goes down, you will have to pay less than you received when you did the short.
Shares, depending on the market, have certain rules about when you can short (basically to prevent massive runs from collapsing companies). Outside of shares, shorting is very common in commodities and futures. Short selling significantly increases market liquidity, and so beyond being personally motivated by making money, it's a useful market process.
Now, margin; let's say I short ChumpSoft at $50. I short 100 shares. I am given $5000 for selling shares I don't have! Hell yes. Unfortunately, I miscalculated, because ChumpSoft is releasing Skullbuster 6: Duty of War. ChumpSoft goes up to $60. I now need to buy $6000 worth of shares, because I have agreed to do that. But I only have $5000 in my account. Depending on your short and your account size, your broker will require you to have available trading money in your account to deal with this contingency. There are also margin calls; where a broker says "You need to deposit more money because I don't think you can handle the position you have" and if you don't comply, your position is liquidated.
I might not actually short Nintendo though because my EV (expected value) is going to be lower than buying Intrade contracts on the NJ Gubernatorial race.