Comment by CrazyStat
3 days ago
Short selling has unbounded downside. If you borrow $1,000 to short sell TSLA and then it soars you might end up losing $100,000.
If you borrow $1,000 to buy TSLA your downside is limited—you can’t possibly lose more than $1,000.
In either case, your broker will liquidate you around $0. Not guaranteed, but very likely. This is the key risk.
Tether provides a good illustration of the principle I mentioned-- which I concede is a bit theoretical in the case of USD:
Tether is supposed to trade at $1 and gets press when it trades below. But, sometimes it also trades above, at $1.01, $1.02 and even perhaps $1.03. So, if you sold a lot of it thinking trading higher was impossible, you can be surprised.