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The ‘short selling’ is practicable in some banks and it makes you earn when there is a stock value loss.
That’s an example to explain the way it happens:
The X title is worth €100.
If I am sure that it can lose value I choose to sell it (the ‘short selling’ indeed).
I sell 10 titles earning € 1000 (10 titles x €100 values). I never spent money to get them, so in this case I will have a net profit into my bank account.
If the analysis is right the title value (from €100) becomes €50 losing 50%.
Then I’m going to buy the uncovered sold titles. Now the X title is worth €50, I must buy 10 so I will spend €500 (10 titles x €50 values).
In summary, first I earned €1000 then I spent €500 for covering, and at the end of the bank operation I get €500 when the title has halved its value.
This is a permitted activity of the banks, as guarantee they impose automatic protective coverings when the title rises instead going down.

 

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