I'm making a futures trading site where you can bet on price of bitcoins using bitcoins.
It is not same thing as shorting, but you can bet on price of bitcoins getting down.
Here's a beta version for testing:
http://killerstorm.xen.prgmr.com:31337/st/main.htmlI strongly recommend depositing no more than few bitcents because there are no withdrawals yet, it is only . (Or, rather, you need to ask me on forum to withdraw your money.)
Here's a detailed information:
http://forum.bitcoin.org/index.php?topic=14059.0But if you're just interested in shorting, here's how it can work: let's say that current price at exchange is $15 USD for bitcoin but you think it will drop below $5 in a week.
Then you just need to make a futures contract to sell at price higher than $5 in a week. The higher the price the more profit you make, but also chances are lower that somebody will take it. So, for example, you make a contract to sell 1BTC at $10 in a week.
Size of the bet is limited by reserve requirements. It is common to reserve 50%, e.g. you need 0.5 BTC to enter contract for 1 BTC, then you loss is limited to this 0.5 BTC and so is your profit.
Then if price drops below $6.67/BTC you double your bet, winning 0.5 BTC.
If price goes higher than $20/BTC you lose your bet of 0.05 BTC.
If it is in range 6.67-10 then you make some profit, if it is in range 10-20 then you make some loss, if it is exactly $10 then you're flat.