I suppose there's a natural ebb and flow to it in general. When...

I suppose there's a natural ebb and flow to it in general. When buyers are weaker then it's natural to short. But I'm lost when it comes to how the lower priced companies have any short contracts available to buy.

Shorting contracts need to be provided by a broker, who want to make money off the company price going up, and you loosing on your short position. I trade the US markets. If brokers see companies as being too weak, then they'll mark them as "hard to borrow", meaning you can't short the company, as shorting is based on borrowing the positions:

• Borrowing:

  An investor borrows shares of a stock they believe will decline in value from their broker.
• Selling:

  The investor immediately sells the borrowed shares in the market, hoping the price will drop.

Buying Back:

If the stock price falls, the investor buys the same number of shares back at the lower price.

Profit:

The investor returns the shares to the broker, pocketing the difference between the selling price and the buying price as profit.

Risk:

If the stock price rises instead of falling, the investor will incur a loss, as they'll have to buy the shares back at a higher price than they sold them for.

How is a broker willing to supply shorting contracts on any penny stocks?

Unless of course they are trading in house.....which is more than likely the case

3. How "In-House" Short Trading Works

• Finding Internal Buyers:

  A firm might use its in-house resources to find potential buyers for a security it intends to short.

  
  
• Internal Trading:

  The firm could then facilitate the short trade internally, with one part of the firm (e.g., a sales team) borrowing the shares and another part (e.g., a trading desk) selling them short.

  
  
• Hedging and Risk Management:

  In-house short trading can be used for hedging purposes, where the firm short sells a security to offset potential losses from a long position in a related asset.