A fun thing happened because the internet.
Essentially this is what happened:
This is not a small thing and the larger picture is very, very complex but I believe that this event is certainly not inconsequential. But, here’s your high-level:
The difference between investing in a stock with the hopes that it goes up is that there is a “cap” or ceiling to how much you can make and lose based on your initial investment — if you believe a $10 stock will rise and you buy 1 share at that price and it goes to $20, you’ve just made $10 (pre-tax, pre-fees). And, if this doesn’t work out and the stock goes to $0, then, you’ll lose $10. Basic risk / reward.
When you “short” a stock, you effectively borrow the stock (super-simplifying it here folks) with the promise to pay in the future when you sell it. There is no bottom (or no “reverse ceiling”) to this amount of money and it can go badly very, very quickly.
So, if you buy the stock at $10 with the hope that it goes down to $0 (“shorting the stock”) but instead it goes to up to $20, you’ve lost some money. But what if it doesn’t stop and it goes to $200 dollars a share? You’ve now lost 10 times more!! These losses continue to pile up until you exit or until you’re able to pay your balance / “loan”.
The internet was made for this type of magic! Big thanks to my dad who taught me the fundamentals of investing when I was in Middle School!