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by srgseg 5862 days ago
If I invest my money in a stock, I'd feel safer if other people in the market had had the opportunity to short the stock prior to my investment.

This is because when someone shorts the stock, this results in a sale of the stock, thus pushing the price of that stock down. Thus when they short, their actions help to prevent the price of that stock increase to a level where it is unreasonably highly priced.

So by preventing the stock price from being unreasonably high, this helps prevent me from investing in the stock at an unfairly high price.

People shorting the stock can cause chaos in certain situations where lots of players are highly leveraged and there is significant counterparty risk (in naked short scenarios). However, I fail to have too much sympathy for highly leveraged players because I want them to get burned by the market so they realise it's an unstable and dangerous situation for them to be participating with unreasonably high leverage.