MGT Capital Investments Inc. (MGTI)

[SteveWin]

As I understand it (having never sold short myself)... First, one asks their broker for permission to sell short / enable shorting on one's account. (account minimum value rules apply, not everyone can short, mostly the bigger fish). Then, when you put in a short order, your broker "lends" you that many "borrowed" shares, and sells them on your behalf. So, if you short 10,000 shares today, you'd RECEIVE about $37,500 at today's price.

BUT - you'd better hold that money (Broker may not let you spend it right away), because within like 5 days, you MUST "BUY to cover" your short position. So, you MUST BUY 10,000 shares within 5 days. If the price drops to $2.90/share when you BtC, you only spend $29,000 to cover your short - you keep the remaining $8,500 from the $37,500 you received originally. But, if the price rises and stays up, eventually you MUST BUY at the higher price. If it rose to $4.75 and held there, you'd have to spend the $37,500 and an additional $10,000 to cover your short. That would be a $1/sh loss.

The dangerous thing about shorting, is that as prices rise, some people sell to take profits and capitalize on increasing numbers of buyers, but some are more inclined to hold for further increases. This can reduce the number of shares available to buy, right when you NEED to buy - forcing you and other shorts to bid even higher for the shares you need. That is called "short squeeze" - if you want to see what it can be, look back about a year in the DRYS chart.