If you’re at all interested in the world of finance, then you should seriously be watching Billions this winter.

It’s loosely based on the marauding U.S. Attorney for the Southern District of New York, Preet Bharara, who went after Wall Street banks and executives following the aftermath of the Great Recession in 2008. Not only is it a fantastic drama starring the wonderful Paul Giamatti, but if you watch closely, you might just learn a thing or two about the high-flying world of finance.

The fourth episode centers on the character of Bobby “Axe” Axelrod, a hedge fund king and 9/11 survivor, who has to fight off a short squeeze on his company’s most important holdings. Usually Axelrod is the one who applies pressure but this time around the tables are turned.

What is a short squeeze?

To understand the reason Axelrod goes to the lengths he does in Billions, it’s necessary to know what a short squeeze even is, and how it can be used as an attack.

Before we can do that, though, we have to understand what short-selling is.

Shorting, or short-selling, a stock means you are betting against a stock. If you’re an investor who simply buys a share of Google, then you are “long” Google. The fact that you put your hard earned cash into Google is a signal of your confidence in the company. You’ve bought shares of Google and plan to hold them, with the expectation that the share price will rise reasonably within a certain amount of time.

Shorting is a bit different. When one shorts a stock, they do so because they think that the price will go down in the near future. So if you look at the current share price of Google and think it’s begging for a crash then you might want to take advantage of that.

Shorting is also different because you don’t use your own money to short a stock.

So…let’s say you want to short 100 shares of Google. What does that entail?

First, you’d borrow those shares so you can sell them. This may done through a broker, but once you’ve got the shares, you’re now on the hook for the value of those shares. You’ve essentially borrowed the money to purchase them – so you’ll have to pay it back at some point. Let’s say the value of the shares was $100, so at this moment you sold them for $100.

Then, imagine a few days later, word gets out that Google’s fleet of self-driving cars went on a rampage, destroying millions of dollars’ worth of public property. The search engine giant’s reputation tanks and their share price falls. Womp, womp, womp…Google’s stock is now worth $50. You then buy back the same number of shares you borrowed at a discount. Return the shares to your broker and the difference between what you sold and bought it back for is your profit!

That’s the essence of a shorting a stock.

It’s easy to see though where the trouble might come in, isn’t it? What if the price doesn’t go down…even worse – what if it goes up?

If the share price goes up, you now have to pay extra to buy back those shares you borrowed. So if, instead, the news that day is that Google cracks the code to artificial intelligence you might see their share price rise to $150. Well in that case, you have to shell out the extra cash if you plan on returning the shares you borrowed from your broker. That’s a short squeeze.

That’s the danger of shorting a stock – especially because, in theory, the share price of a stock could go up indefinitely. Depending on how many shares you’ve borrowed…you could end up on the hook for a massive amount of money.

Why is a short squeeze something to fight off?

The short squeeze as an attack strategy

Bobby Axelrod, our hedge fund king, runs into trouble because his attempt to short-sell becomes personal. The owner of the company, Chuck Rhoades Sr., attempts to artificially pump up the stock when he comes aware of Bobby’s short. By pushing up the stock price for as long as he can, he hopes to exert as much financial turmoil on Bobby as he can. Given enough time, the toll would be too great for even Axelrod and he would abandon his plan, getting squeezed out of his short position.

It’s fairly simple for large, influential investors to apply a short squeeze. When you have as much money as some of the characters in Billions, you can move markets pretty easily, and if doing so purely to spite someone seems a little high-school drama, then you might be surprised to learn that this actually happens.

For a real life example look no further than the battle between two billionaires, Carl Icahn and Bill Ackman. Bill Ackman, a hedge fund manager, came out publically against Herbalife. He announced his shorting of the company due to his belief that the company was badly run and in his words, a pyramid scheme. All in all, Pershing Square (Ackman’s hedge fund) shorted $1 billion worth of Herbalife shares.

Carl Icahn and Bill Ackman have had a contentious history between them and shortly after Ackman announced his position, Icahn bought up shares in Herbalife – a near 13% stake. When someone like Carl Icahn, with all his influence, buys shares of anything, people tend to follow suit. Trading activity increases when someone like Icahn gets involved, which also gets the media involved and all this becomes a vicious upward cycle…which makes life very, very difficult for Ackman. Because of his massive position, even small upward movements in the share price of Herbalife can lead to huge absolute losses.

Spoiler alert: While Ackman’s battle vs. Icahn and Herbalife continues with no end in sight, we have a more concrete ending to the storyline in Billions. Despite the efforts of Chuck Rhoades Sr., Bobby Axelrod holds on until news gets out that the company in question has lost a crucial contract. The stock price plunges and Axelrod walks away with a cool $15 million.

Not a bad score.