Short Selling A Stock? It’s All About Location

Shorting a stock is not always as easy as buying the ask to go long.

Sell a stock short
Written byWayne Duggan
Published on14 Sept 2022

Most traders are aware that trading stocks that go down can be as profitable, if not more so, than trading stocks that go up. Shorting a stock is not always as easy as buying the ask to go long.

Borrowing Shares

In order to sell a stock short, you must first have access to borrowable shares of the stock. The more popular a stock is among short sellers, the more difficult it can be to borrow. When other shorts snatch up all the available shares, it can become difficult to short the stock

 

Successful trading is all about timing, so devoting precious minutes locating stocks to short, and determining whether or not there are shares available to borrow can be a costly process. That’s why Lightspeed Trading has made it particularly easy for traders to immediately identify shortable stocks.

How To Locate Shortable Stocks


After logging into the Lightspeed Trader platform, users simply have to type in the stock ticker of their choice into the Quote box. Once the ticker is entered, a symbol will immediately appear in the upper right-hand corner of the Quote box. If a green box with the letter E appears, it means that the stock is relatively easy to borrow and is immediately available to short. Short sellers who get the green box have the go-ahead to place a short sale order.

 

If you see a gray box with the letter L instead of an E, that means your broker still needs to locate shares. This location process can be completed by requesting to locate the appropriate number of shares automatically in the Short Request window of Lightspeed Trader.

If you get a red T, it means the security is unavailable to borrow due to regulatory purposes and cannot be shorted at that time.

 

Other Factors To Consider

 

In addition to the normal trading commissions, short sellers must pay borrowing costs called Locate Fees for any hard-to-borrow shares they sell short. These costs tend to be higher the more difficult a stock is to borrow, so popular hard-to-borrow stocks can often be the most expensive to short.

 

In addition to borrowing costs, shorts are also responsible for paying margin interest on short trades and making any dividend payments paid out to their borrowed shares. Short sellers can also find themselves at the mercy of short squeezes and “buy-ins,” which can occur if a heavily-shorted stock makes a large move up in price.

 

Short selling is a tactic employed by people up and down Wall Street. The biggest thing to remember, however, is that shorting a stock opens you up to unlimited risk because in theory, a stock price can go up forever, while when compared to going long, the floor of the trade would be the stock price hitting $0. So, remember, while shorting can be a profitable strategy, make sure it’s done correctly.

Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“Content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content are solely based on the user's independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer or recommend any of the services or commentary provided by any of the market commentators/educators or service providers, and any information used to execute any trading strategies are solely based on the independent analysis of the user.


Futures trading involves the substantial risk of loss and is not suitable for all investors.

Each investor must consider whether this is a suitable investment since you may lose all of or more than your initial investment.

Past performance is not indicative of future results.


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Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“Content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content are solely based on the user's independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer or recommend any of the services or commentary provided by any of the market commentators/educators or service providers, and any information used to execute any trading strategies are solely based on the independent analysis of the user.

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