You mean their gains are limited to 100% of what they sold the stock at. Their "investment" is the lending fee that they paid for the right to sell the stock. If you pay a thousand dollars in lending fees, sell the stocks for ten thousand dollars, and buy them back at a penny, and return them to the lender, you've made a return of 1000%.

I am not into stocks at all, but I believe this is why it isn't that attractive to invest in BP:

Assuming you had 100k to invest and bought when it was at its low which is about 30 per share-

That would net you 3333 shares - Then, if the stock instantly went back up to 60 and you sold after a year, you would have 200k, which you would have to pay 15% long term capital gains (federal) and 9.3% for California ) - This means your total take home under the most ideal of situations would be about 75k , not even doubling your money.

Now, if it dipped into the single digits, that is another story. That is where you can invest 100k and turn it into millions.

Uh, no. But the concept of investing doesn't really work. The actual investment, if any, in that case is the one penny purchase, which actually would make the returns higher still. You know, if you want to look at it that way, which no one does. A more practical way to look at it is in terms of "amount risked", which is infinite.

I suppose from an accounting point of view, the "amount invested" is actually x number of BP securities, just as you normally invest x number of Federal Reserve securities. It's just one kind of paper or another on one side of the balance sheet or the other.