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I am new to sell short concept. but I'm interested because I think some stocks may go weak in the future.

I am using Firstrade but when I try to sell short some stock, it told me This symbol cannot be shorted. after I hit the "SEND ORDER" button.

What should I do? Is there any introduction/suggestion for me?

Thanks,

  • 2
    You should ask your broker for education material on the matter. Not all stocks can be shorted. You should also check with your broker for a list of their shortable stocks. – Victor Sep 16 '14 at 12:06
  • Provide more detail about the markets and securities you tried to trade on the short side. Regulations vary. – Chris W. Rea Sep 16 '14 at 15:43
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Any publicly traded financial instrument can be sold short, in theory. There are, however, many regulations associated with short sales of US equities that may prevent certain stocks from being sold short at certain times or through certain brokers.

Some examples:

  • the most basic requirement (this isn't a regulation, it's just the definition of a short sale) is that you or your broker must have access to someone willing to loan you his/her shares. If you are interested in shorting a security with few shares outstanding or low trade volume, there may simply not be enough people in the world willing to loan you theirs. Alternatively, there may be a shareholder willing to loan shares, but your broker may not have a relationship with the clearing house that shareholder is using. A larger/better/different broker might be able to help.

  • threshold securities list - since 2005, each day certain securities are not allowed to be sold short based on their recent history of liquidity. Basically, if a certain number of transactions in a security have not been correctly settled over the past few days, then the SEC has reason to believe that short sales (which require extra transactions) are at higher risk of falling through.

  • circuit breaker a.k.a. alternative uptick - since 2011, during certain market conditions, exchanges are now required to reject short sales for certain securities in order to prevent market crashes/market abuse.

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  • Isn't there a price limit as well? Under $5? – JTP - Apologise to Monica Sep 18 '14 at 1:55
  • One question: What benefit would those people who willing to loan me the shares get? If they are willing to do so they should have some benefits from this, and no matter whether the price goes up or down. – AGamePlayer Sep 18 '14 at 14:57
  • Yes, individuals/companies who loan their shares for short selling receive a fee/interest payment from the borrower. – dg99 Sep 18 '14 at 16:34
  • @JoeTaxpayer Could very well be. I don't really know much about short sales beyond the Reg SHO rules. – dg99 Sep 18 '14 at 16:35
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Some platforms/brokers have HTB indication for a stock symbol, meaning Hard To Borrow. That usually means you can't sell it short at the moment.

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