The problems with shorting a stock as volatile as pennies is the fact that you are selling something you do not own.you borrow the stocks from your broker. This is where most broker will not engaged in this type of transaction unless their client are in real good standing with them and hold a large margin account that will cover the "possible cost" of the dreaded unlimited loss factor. Some big names out there, not to name anybody, often use the naked short sell tactic, also legit, where you sell non existent shares. long story but widely used. All to say that short selling is ABSOLUTELY necessary in a balanced market and it maintains healthy level of liquid. BTW shorting has been done since the early '30s. The only exception is FUNDS can not be shorted.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.