Naked shorting: The curious incident of the shares that didn't exist (2005)
Recent events have a lot of people confusing high short interest with naked shorting.<p>A stock can have short interest greater than 100% without any naked shorting.<p>How is this possible? The textbook definition of a "short sale" is that someone borrows stock and then, literally, <i>sells it</i> short. The buyer of the stock is free and clear to do whatever they want with the stock, including re-lend it for another short sale. Wikipedia has a good primer on how this works: <a href="https://en.wikipedia.org/wiki/Short_(finance)" rel="nofollow">https://en.wikipedia.org/wiki/Short_(finance)</a><p>This has created a lot of confusion on WallstreetBets, where many participants have come to believe that Gamestop's short interest of 113% means that there are 13% more shares shorted than long positions to cover. It's not true, though, because the long interest is always greater than the short interest.