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How shorting a US stock works
How do I short a US stock?
Short answer: You borrow the shares, sell them, and buy them back later — profiting if the price fell. In practice you either use a margin account with locate availability, or, outside the US, a CFD which achieves the same exposure without a borrow. The critical asymmetry: your maximum gain is capped at 100% and your maximum loss is not capped at all.
The costs nobody quotes upfront
Borrow fees on hard-to-borrow stocks can run to double-digit annual percentages, charged daily. You also owe any dividend paid while short. Both accrue whether or not the trade is working.
Forced closure risk
Your broker can recall borrowed shares at any time and close your position at the prevailing price. Being right eventually is worthless if you are closed out first.
Short squeezes are a structural risk, not a rare event
Heavily shorted small caps can rise several hundred percent in days as shorts are forced to cover into thin liquidity. This has repeatedly destroyed positions held by professionals with more capital than you.
Where to do it
Frequently asked questions
Can I short with any broker?
No. It requires a margin account with borrow availability, or a CFD account where shorting is available by default.
Is shorting riskier than buying?
Structurally, yes. A long position can lose 100%. A short position has no upper bound on loss.
Reviewed August 2026. Information only — not investment, tax or legal advice.