Introduction
Short selling, a trading strategy that profits from the decline of a security's price, has long been a subject of debate and scrutiny. While proponents argue its role in price discovery and market efficiency, critics raise concerns about its potential for manipulation and systemic risks. This article delves into the intricacies of short selling, examining its mechanics, potential benefits, and the risks associated with market manipulation.
Short selling involves borrowing and selling a security that the trader believes is overvalued, with the intention of repurchasing it at a lower price in the future to return to the lender. This strategy allows traders to profit from declining markets, providing liquidity and potentially identifying mispriced assets. However, the practice also carries inherent risks, particularly when coupled with unethical or illegal activities aimed at artificially depressing a security's price.
