Short selling
Short selling is a trading strategy that enables you to sell a stock you do not own. You can borrow shares of a stock, and then sell them. If the price of the stock drops, you can buy the stock at the lower price and make a profit. If the price of the stock rises, you will incur a loss. To learn more about short selling in general, check out SEC's Introduction to Short Sales. Keep in mind you can only execute short sales in a margin account.
This is a rolling release, so if you don’t see short selling yet, check back soon for it.
Short selling is risky and not suitable for all investors. You may have unlimited losses and lose more money than you invested with a short sale.
Before considering short selling, you should fully understand the risks, including: You can lose more money than you invest Your losses may be unlimited, since a stock price can increase indefinitely We can close some or all open short positions without contacting you.
For additional information on the terms and risks associated with margin investing, review What’s margin investing and our Margin Disclosure Statement.
Market, Limit, and Stop order types are supported for short selling. Only Good for Day orders are supported for opening short trades. You can make short trades during market hours and extended-hours trading. However, you cannot open short positions during overnight hours in our 24 Hour Market.
Robinhood may charge you fees associated with borrowing stocks as a result of short selling. If you have an open short position in your account, whether it is established through short selling, option exercise or assignment, account transfer, or otherwise, Robinhood can charge a stock borrow fee. These fees will fluctuate and change throughout the day and are based on supply and demand dynamics. The fee for each position is calculated as the largest short position held open each day, multiplied by the end of day market price multiplied by the quoted borrow rate divided by 360.
When you make a short trade, the borrow rate will show on the stock’s detail page and will update dynamically while placing the order. A borrow fee begins accruing when the short position is opened (trade date) and will stop accruing when the short position’s closing trade is settled (settlement date). Borrow fees are charged monthly on the 4th business day of the following month. Note that borrow fees may vary by symbol.
Keep in mind the short trade borrow fee is different and in addition to the cost of investing on margin. For details, check out How much does it cost to use margin investing?
Yes, Robinhood can close short positions at any time and without notice. We may close a short position for one or more of the following reasons:
You can place a short sale at Robinhood in our app, on web classic, and on Robinhood Legend. Because you're borrowing shares, you’re required to have margin investing enabled within your individual investing account. If your account doesn’t have margin investing enabled yet, complete these steps to apply for margin investing. Note that boxed positions, which occur when holding simultaneous long and short positions in the same security in the same margin account, are not supported by Robinhood.
Keep in mind that you must be aware of the risks, meet eligibility requirements, and have a minimum portfolio value of $2,000 before accessing margin investing and placing short trades.
Follow these steps to place a short trade within your margin account:
Check out Trading with Robinhood Legend for the different options for trading, and then:
You must have a minimum portfolio value of $2,000 before you can access margin investing, including short selling. When you place a short sale, the cash received from the sale is not added to your buying power. It is held aside to be used when the short sale is closed. A short position represents negative market value. For more details about buying power and margin, check out What’s the total maintenance requirement?
Keep in mind that if you’re flagged as a pattern day trader, you must have $25,000 in portfolio value (minus any crypto positions) before you can continue day trading.
If you’re borrowing on margin and fall under $2,000 portfolio value, you’re at risk of a margin call and potential liquidation.
If you have an open short position on a dividend-paying stock, the owner of the shares is still entitled to any dividends paid so you typically would be required to pay the dividend equivalent to the person or entity that lent you the shares.
Corporate actions like forward splits, reverse splits, mergers, spin-offs, or rights offerings are reflected in your short position in a manner that is the inverse of how they impact the lending shareholders.
For tax purposes, short selling is included in wash sale rules and applies at the tax payer level across all taxable investing accounts, including accounts held outside of Robinhood. Any dividends or borrow fees charged will be included in a supplemental section of your [Consolidated 1099](https://robinhood.com/us/en/support/articles/taxes-and-forms/#:~:text=Tax%20forms-,What%27s%20a%201099%3F,-Form%201099%20(aka) from Robinhood Markets, Inc. for the applicable tax year. Consult with your tax advisor about the appropriate tax treatment and any tax implications associated with short selling.
Sometimes called the alternative uptick rule, Rule 201 is designed to restrict short selling from further driving down the price of a stock that has dropped more than 10% in one day. It imposes a restriction on prices at which securities may be sold short. You will be notified within the trade process if a stock is subject to the uptick rule.
Short selling and margin investing involve borrow fees, interest charges, and inherent risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Before using margin or making short trades, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation.
Robinhood Financial can change its borrow fees and maintenance requirements at any time without prior notice. If the equity in your account decreases to less than the borrow fees and total maintenance requirement, you’ll have to deposit additional cash or acceptable collateral. If you fail to meet your minimums, Robinhood Financial may be forced to sell some or all of your securities, with or without your prior approval.
Robinhood Financial charges a margin interest rate and borrow fees for short trades that vary depending on your settled margin balance and the upper bound of the Target Federal Funds Rate, which is set by the Federal Reserve and is subject to change without notice. The formulas used to calculate the margin interest rate are subject to change at Robinhood Financial’s discretion.
For more information, review FINRA’s Investor Alert and Robinhood Financial’s Customer Relationship Summary, Margin Disclosure Statement, and Margin Agreement. These disclosures contain important information on Robinhood Financial’s products and services, conflicts of interests, lending policies, interest charges, and the risks associated with margin investing enabled accounts.