I know little-to-nothing about stock trading. Can someone please give me the "Dummie's" version of

[progree]

12. Here's my version as it's been explained to me

When I sell 1000 shares of XYZ corporation short, I am borrowing 1000 shares from a broker and then I sell those shares on the open market. If the current price is $30/share, I get 30*1000 = $30,000 from the sale that I put in my pocket. Cool.

But I have to eventually give the shares back to the broker. I don't know what the time frame of that is, I think a few weeks.

Remember: He who sells what isn't his'n, must pay up or go to prison.

(the female and gender neutral versions of that don't rhyme as well).

Anyway, the time comes when I have to give 1000 shares back to the broker. Let's say at that time, I can buy 1000 shares for $10/share on the open market and do so, at a cost to me of 10*1000 = $10,000.

And then I give the 1000 shares that I just bought to the broker.

Cashwise, I pocketed $30,000 but had to spend $10,000 to buy back the shares, leaving me with a $20,000 profit. Life is good.

But what if instead, when it came time to buy the shares, the price was $40/share rather than $10/share? Well I'd have to pay $40,000 for the 1000 shares. And then I give those 1000 shares to the broker.

Cashwise, I pocketed $30,000 but had to spend $40,000 to buy back the shares, leaving me with a $10,000 loss. Life sucks and then you die.

Edited to add: If A HERETIC I AM corrects this, he is almost certainly right since he actually worked as a broker.