---
title: Short Selling
group: Trading
subtitle: Profit from declining stock prices by borrowing and selling shares you don't own.
description: How short selling works at Light Horse Securities — margin requirements, share locate, borrow fees, and the risks of holding short positions.
---

## 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