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I have been doing some research about equity trading and the stock market in general, and I have a doubt. I see that a lot of people is looking for short-selling stocks, but that is not so easy because most brokers wont allow it, I guess this is mainly because sometimes borrowing the shares to do so may not be easy.

But on my research, I also found that is it possible to short sell a CFD of a stock, and a lot of brokers allow this on all their instruments. (Always talking about non US citizens since I think they are not allowed to trade CFD)

So why would people still look for naked short selling a stock (with borrowed shares), instead of just using CFDs? What are the pros/cons (besides margin on cfds) of one over the other?

  • You should clarify your last paragraph. Re: "naked short selling a stock (with borrowed shares)" doesn't make sense, because by definition a naked short sale means a short sale where the shares are not first borrowed. – Chris W. Rea Dec 13 '13 at 16:32
  • Why are you using two accounts? I see your second set of edits is under another name. Please register and use one account. You are able to comment on your own question, and on answers to your questions, provided you use the account with which you posted the question. – Chris W. Rea Dec 13 '13 at 21:10
  • @Chris W. Rea Sorry, I am new to the site. I was using a virtual machine when I posted the question and I forgot I had the other account on the main computer when I tried to comment. – kramxil Dec 13 '13 at 22:05
  • No problem. If you intend on sticking around, you might consider signing up with one of them. It is also possible to have your two profiles merged. Registering will preserve your account and reputation across multiple computers. You'll also be able to cast votes on questions & answers. – Chris W. Rea Dec 13 '13 at 22:38
  • AS Chris commented, can you remove the 'naked' part from your question? Because it seems you are asking about normal shorting, not naked shorting – Victor123 Feb 7 '14 at 22:37
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Investopedia has a nice article on this here

The Key benefit looks like better returns with lower capital.

The disadvantage is few brokers offering that can be trusted. Potentially lower return due to margins / spreads. Higher leverage and can become an issue.

  • I understand that margin is a clear difference between short-selling stocks and short-selling CFDs, but as I said on the question, besides that, why people still look for short-selling stocks (which seems to be hard) when they can short-sell CFDs (which seems to be easier)?, I think margin can be kind of irrelevant because you can risk the same amount with or without margin (if you have enough cash). – kramxil Dec 13 '13 at 22:05

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