Eg 'in practice what happens is someone else unknowingly gives you a stock for free':
Someone else willingly and _knowingly_ loans you the stock, and _charges_ borrow costs. As a private investor you can participate in stock lending, just check with your broker. Index funds are often more than happy to loan out their shares, partially because it's one of the few ways they have to make extra money.
(Also maybe partially because it helps offset their impact on the market. If a new company makes it into the S&P 500 and all of a sudden index funds have to own 20% of that company, you might expect prices to go up in _anticipation_, ie before the index fund can buy. But if at the same time the same 20% of that company's stock becomes available for loan and thus short-selling, that might help counteract this move.)
Eg 'in practice what happens is someone else unknowingly gives you a stock for free':
Someone else willingly and _knowingly_ loans you the stock, and _charges_ borrow costs. As a private investor you can participate in stock lending, just check with your broker. Index funds are often more than happy to loan out their shares, partially because it's one of the few ways they have to make extra money.
(Also maybe partially because it helps offset their impact on the market. If a new company makes it into the S&P 500 and all of a sudden index funds have to own 20% of that company, you might expect prices to go up in _anticipation_, ie before the index fund can buy. But if at the same time the same 20% of that company's stock becomes available for loan and thus short-selling, that might help counteract this move.)
See good old Wikipedia https://en.wikipedia.org/wiki/Short_(finance) for more.