[celticninja]

So they would start shorting it once it starts to rise? I thought perhaps someone holding the shares would start to sell at maybe 5% and then buy back in on the way down. But with shorting I guess you don't need the capital outlay of owning the shares in the first place.

[404error]

Consider the following short-selling example. A trader believes that stock SS which is trading at $50 will decline in price, and therefore borrows 100 shares and sells them. The trader is now “short” 100 shares of SS since he has sold something that he did not own in the first place. The short sale was only made possible by borrowing the shares, which the owner may demand back at some point.

A week later, $SS reports dismal financial results for the quarter, and the stock falls to $45. The trader decides to close the short position, and buys 100 shares of SS at $45 on the open market to replace the borrowed shares. The trader’s profit on the short sale – excluding commissions and interest on the margin account – is therefore $500.

Copied from: http://www.investopedia.com/terms/s/shortselling.asp#ixzz3ft...

[celticninja]

My query was really - if you short it in advance wouldn't it require the price falling below it's starting price for you to profit. It seems that this was intended to raise the market price in the short term, therefore only shorting it on the way up would make you profit when shorting. Also it did not fall below the original price when it corrected.