Trading

Short Selling

Profit from declining stock prices by borrowing and selling shares you don't own.

What Is Short Selling?

Short selling involves:

  1. Borrowing shares of a stock you don't own
  2. Selling those shares at the current market price
  3. Later buying the shares back (ideally at a lower price)
  4. Returning the borrowed shares and keeping the difference as profit

If the stock price rises instead, you face potentially unlimited losses.

Requirements

Short selling requires a margin account. A cash account cannot be used for short selling.

Share Availability (Locate)

Before you can short a stock, Light Horse must confirm that shares are available to borrow — this is called a locate. Not all stocks are shortable at all times.

  • Easy-to-borrow stocks: major large-cap stocks with high liquidity — generally available
  • Hard-to-borrow stocks: low-float or heavily shorted stocks — may carry higher borrow fees or be unavailable

Borrow Fees

Short sellers pay a stock loan fee for each day they hold a short position. These fees are charged at market rates and vary by stock. Hard-to-borrow stocks can carry significant daily fees.

Risks

  • Short selling carries theoretically unlimited upside risk — a stock can rise without limit
  • You remain responsible for dividends paid while you hold the short position
  • Your short position can be forcibly closed (called in) if shares become unavailable