The word “Short” in its non-vertically challenged definition first appears in 14th Century England. Telling short of someone meant you held him in low esteem. Then, towards the end of the 19th century, someone came up with the idea of selling something before buying it. It was in a book on business arithmetic’s and said that when it came time to deliver what someone had bought, you were short on its supply. A nice way of putting it.

But a great way of trading the markets. Jess Livermore was the first notorious short trader. Then George Soros did it to the pound sterling in 1992. The most recent example is John Paulson, whose adventures in the sub-prime market are notoriously missing from Andy McKay’s Big Short.

OK. Now let’s see why going long is easy to understand. You open a buy position on something down here and wait for it to cover the spread. Anything above that is profit. Easy enough? Good.

Now, what do we do with Facebook shares when they tumble. Well, if we actually BOUGHT the shares, your choice is to either sell at a loss or hold on for dear life, hoping the tech giant will recover. With derivatives, our situation is much much better.

Pretend your broker is a really good friend who is prepared to loan you some of his Facebook shares. They’ve more than earned their keep and being generous comes easy. The shares are near their all-time high here at 203. We know that everybody loves to hate Mr. Zuckerberg, and there’s another congressional hearing, and the public’s losing patience. In short, we’re waiting for the tumble. We loan those shares here some place, where they’re worth 201. Our broker friend doesn’t want to sell – he’s still optimistic. Now, as soon as we get hold of these shares, we sell them below market value. Let’s say at 199. People think we’re mad and they pounce on us. Wish we had more. Now we wait for the shares to start falling and we buy new ones at 182. We immediately return these shares to our broker who’s still hoping for the turnabout. Whatever – he’s just happy we didn’t skip town. You know what: let’s say we bought MORE than what he gave us. He’s made an easy profit as well. Well, he WILL if Facebook recovers.