Short sellers notch $8.7B profit as SpaceX shares dip to IPO price

[dupe] Discussion: https://news.ycombinator.com/item?id=48938001

The person you sold it to after borrowing it, who paid for it at the elevated price.

The buyer of your short sale would lose money to you. Remember options are contracts between two parties.

Shorters are selling to willing buyers at the current fair market price. So that they may survive.

> who do you make money from?

When you own stock at a broker in a margin account, you may sign an agreement to allow the broker to lend out your stock to someone else. For lending your stock, you are entitled to a stock-borrow fee which usually is quite small say 0.25%, and paid by the borrower (short-seller). The borrower then sells the stock to someone else. At a later point, the short seller closes their position by buying it back, and returning it to you. This is roughly the mechanics of it. So, to answer your question, the short seller makes money from folks who buy high and sell low. In this specific example, the stock-borrow fee say was 5% because, the float is still low, and if the short seller borrowed at $165 after the IPO and sold it, and then bought it back at $135 and closed their position, they made money from folks who bought at $165 and sold at $135.

When you short a stock, you borrow shares from someone who is holding that stock and their broker gets money for lending the shares and sometimes the holder of the shares lent out gets money. You sell the shares, probably to a market maker. The cash is credited to your account and held as collateral.

Sometime later, the stock has fallen and you decide to close the position. You buy back the shares with the borrowed money probably from a market maker and close your position. You give the shares you borrowed back to the lender. Your net profit is sell_price - buy_price - borrow_fees, anything left is your profit.

Stocks are not zero sum like options or futures, they also have no expiration date (unlike derivatives), it’s possible a short seller sold shares to someone who later profited, and then it’s also possible to buy the shares from someone who profited, even if you made a profit on shorting the stock.

So the answer is “other market participants” who also may have profited on their buy or sell.