> Shorting should be banned... as it never does the company any favours.
No, here are my 5 reasons or examples why shorting is good.
_1) Shorts can be beneficial to the company:_
Tesla made a killing from being one of the most shorted stocks. As the stock price rows, it experienced frequent short squeezes as the $TSLAQ short positions holders experienced forced liquidation. Their capital became transferred from the shorts to the longs further boosting the positions of the long investors. $NKLA, $BYND, and $PTON as well.
_2) Shorts Beneficial to long investors:_
Long investors sometimes receive interest payments from short sellers. Heavily shorted stocks become Hard to Borrow (HTB) due to high short interest. HTB stocks cost money to short as represented by an annual interest payment. Robinhood traders with large blocks of HTB stock receive interest payments. IBKR traders using the stock yield enhancement program also receive interest payments. Furthermore, investors of popular Vanguard Index Funds such as VOO and VTI outperform the benchmark by a tiny amount. This is because Vanguard lends out a small portion of the heavily shorted stocks in it's index for interest payments. Then it takes those interest payments and reinvests it back into the ETF further boosting the price.
_3) Shorts allow smart investors to profit regardless of the type of market:_
Hedge funds will short overvalued stocks and long undervalued stocks so that regardless of the market direction, the hedge fund will still make a profit. This stance can reduce portfolio volatility and performance rollercoaster long-only investing can be.
Despite all of these positives for short selling, it would be interesting to see an exchange that bans short selling just for the sake of differentiation. It could never be a popular exchange due to the lack of traded options but the differentiation might be enough to allow it to succeed.
No, here are my 5 reasons or examples why shorting is good.
_1) Shorts can be beneficial to the company:_
Tesla made a killing from being one of the most shorted stocks. As the stock price rows, it experienced frequent short squeezes as the $TSLAQ short positions holders experienced forced liquidation. Their capital became transferred from the shorts to the longs further boosting the positions of the long investors. $NKLA, $BYND, and $PTON as well.
_2) Shorts Beneficial to long investors:_
Long investors sometimes receive interest payments from short sellers. Heavily shorted stocks become Hard to Borrow (HTB) due to high short interest. HTB stocks cost money to short as represented by an annual interest payment. Robinhood traders with large blocks of HTB stock receive interest payments. IBKR traders using the stock yield enhancement program also receive interest payments. Furthermore, investors of popular Vanguard Index Funds such as VOO and VTI outperform the benchmark by a tiny amount. This is because Vanguard lends out a small portion of the heavily shorted stocks in it's index for interest payments. Then it takes those interest payments and reinvests it back into the ETF further boosting the price.
_3) Shorts allow smart investors to profit regardless of the type of market:_
Hedge funds will short overvalued stocks and long undervalued stocks so that regardless of the market direction, the hedge fund will still make a profit. This stance can reduce portfolio volatility and performance rollercoaster long-only investing can be.
Despite all of these positives for short selling, it would be interesting to see an exchange that bans short selling just for the sake of differentiation. It could never be a popular exchange due to the lack of traded options but the differentiation might be enough to allow it to succeed.