Shorting Stocks Explained 3 Different Ways: Porsche, Givenchy, and Pokémon

You might be reading this because you’re interested in what happened with GameStop (GME) stock in 2021. If that’s the case, here’s “shorting a stock” explained 3 different ways. Hopefully after this it’ll make sense. If it doesn’t, we’ve failed you.

What is shorting a stock?

“Shorting” a stock is a way for someone to make money if a stock goes down. Going “long” on a stock is a way to make money on a stock if it goes up over time.

How can you short a stock?

When someone shorts a stock, it works like this:

1. Robin borrows, for example, a $10 stock from a brokerage (like Robinhood).
2. Robin then sells that stock for $10, and now has $10 cash.
3. Robin then waits for the stock to go down.
4. The stock goes down to $3.
5. Robin buys stock for $3.
6. Robin returns the 1 stock she borrowed to the brokerage and keeps $7.
7. Robin buys boba.

Here’s the GameStop (GME) saga explained…

Shorting stocks in Porsche lingo

Singer sold a bunch of 964’s they didn’t have in stock on Bring-a-Trailer, planning to later buy 964’s from owners at a lower price.

However, Rennlist forum members caught wind of this and bought all the 964’s on the market and ultimately raised the price of them.

Now Singer has to buy them at a higher price than planned, and ends up losing money when they deliver the 964’s they sold on BaT.

Shorting stocks in Givenchy lingo

A user on Poshmark sold a bunch of Givenchy Slides they didn’t actually have on Poshmark, hoping to later buy Givenchy Slides from owners at a lower price.

However, fashion forum members caught wind of this and bought all the Givenchy Slides on the market and ultimately raised the price of them.

Now the user on Poshmark has to buy them at a higher price than planned, and ends up losing money when they deliver the Givenchy Slides they sold on Poshmark.

Shorting stocks in Pokémon lingo

A user on eBay sold a bunch of Charizard cards they didn’t actually have on eBay, hoping to later buy Charizard cards from owners at a lower price.

However, Pokémon forum members caught wind of this and bought all the Charizard cards on the market and ultimately raised the price of them.

Now the user on eBay has to buy them at a higher price than planned, and ends up losing money when they deliver the Charizard cards they sold on eBay.

Shorting stocks summarized

Shorting stocks is a way to make money from a stock price going down. If you’re getting started in personal finance, “going long” on a stock is preferred because shorting stocks can leave you exposed to the potential for unlimited losses.