Brokers for Short Selling

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Contributor, Benzinga
Updated: October 13, 2022

Want to jump straight to the best? Our readers love CenterPoint Securities for short selling.

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Quick Look at the Brokers for Short Selling:

Traders who speculate on an upcoming decline often sell stocks short. But you can also use short sales to balance portfolio allocations and manage risk.

When you sell stocks short, you borrow the stock from your stockbroker, then sell the borrowed stock in the market and leave an open short position. You close that short position by repurchasing the previously sold stock, hopefully for a profit.

As a short seller, you profit by buying back the sold shares at a lower price and making the difference between the sale price and the purchase price on each share. If the stock goes up, you wind up paying a higher price for the short stock and take a loss. Selling short also has some important rules.

Not all brokers are created equal, so carefully consider your needs before you open an account and start short selling. Get started now with our recommended brokers.

Best Brokers for Short Selling

Here’s a list of Benzinga’s preferred brokers for short selling.

1. TradeZero

Fintech Awards Winner

TradeZero won the Benzinga Global Fintech Award for Best Brokerage for Short Selling in 2020 and 2021. TradeZero offers free limit orders and marketable orders, including market orders and marketable limit orders, only cost $.005 per share. 

TradeZero also offers 6:1 intraday leverage on equity. 6:1 day trading leverage allows traders to maximize day trading opportunities in the market. You can get 2:1 leverage on overnight positions. 

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2. CenterPoint Securities

CenterPoint Securities is a brokerage that offers remarkable tools for intermediate to advanced traders, high-volume traders, momentum traders and short sellers. When you short sell with CenterPoint, you can take advantage of a massive short inventory and advanced order routing so that your orders process as quickly as possible.

There are discounts available to active traders, and the customer service team is very responsive. Try a Pro, Web or Mobile account, use the built-in scanners, custom alerts and short locates tools so that you can make wise decisions and stay on top of your portfolio.

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3. Cobra Trading

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Cobra Trading is the go-to broker for short selling with their exceptional access to borrows and direct access routing. Cobra gives you the ability to take advantage of the best opportunities in the market. The broker has been in business for nearly 20 years and maintains the perks of a small firm.

Cobra Trading exclusively opens and services active trading brokerage accounts above $25K. Cobra allows you to trade in a way that a “free broker” cannot.

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4. Interactive Brokers

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Interactive Brokers is the premier broker among active traders who are looking to sell short. Their platform features the IBKR Securities Loan Borrow (SLB) system, which provides short sellers with vital information about the availability of shortable securities such as the quantity available, number of lenders, and both current and historical indicative borrow rates. Advanced traders can even upload a bulk request text file to search for availability of multiple shortable securities at once and download prepared lists of shortable securities grouped by country.

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5. TradeStation

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TradeStation’s platform used to only be best for professional traders who needed a highly technical platform. Now, with TradeStation’s new TS GO account option, you'll have access to professional-grade stock screeners and extensive educational and development tools to help them develop as investors.

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6. TD Ameritrade

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Award-winning broker TD Ameritrade is ideal for short sellers.

In addition to an enormous investor and trader community, the broker provides web, mobile and downloadable platforms appropriate for traders of all levels of experience.

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7. Webull

Webull is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

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8. Moomoo

Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU).

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Short Selling and its Importance in Day Trading

Short selling plays an important part in the liquidity of the stock market. If a stock becomes overvalued according to the market, then short sellers borrow shares to sell the stock down, thereby aligning stock prices to their fair value.

The practice of short selling combines the opinions of both bulls and bears to arrive at an equitable price for stock. Short selling provides other benefits to the market that include greater liquidity, which increases the opportunities for short term traders like scalpers and day traders.

More liquidity also leads to tighter bid/offer spreads that reduce overall costs to active day traders. In addition, shorting stocks increases capital formation and lowers the likelihood of bubbles and crashes due to the increased efficiency and more accurate pricing in the market.

With respect to large investors, fund managers allocate funds efficiently and hedge against long-term investment strategies. In combination with futures and options, shorting stock could be integrated into numerous highly profitable day trading strategies, including arbitrage and momentum trading.

What to Look for in a Broker for Short Selling

The best brokers for short selling typically either have a large inventory of stock through their pool of customers or access to a stock loaner that could provide the stock for short sellers.

Here are a few more things to look into:

  • Most large stockbrokers can obtain considerable amounts of stock through their big institutional clients and have whole departments dedicated to facilitating stock loans.
  • Smaller and less capitalized brokers may not be able to provide every stock to short and therefore may put restrictions on short sales.
  • If you have limited assets, also consider the broker’s margin account. You need a margin account in order to borrow shares from a broker. Stockholders and traders generally allow the broker to borrow their stocks and other holdings as collateral for existing margin debt balances, and that is one of the main ways brokers borrow stock. For example, Charles Schwab can borrow stock worth as much as 140% of the debit balance amount from a client’s margin account, but can't borrow securities that are settled and paid in full.  
  • An interface you understand makes the investment journey that much simpler. If you’re spending your money in a place that confuses you, it’s only a matter of time before you make a mistake or miscalculate your investment.

Start Short Selling Today

Learn the unique rules of short selling and find a trusted broker to help you navigate the market. Our recommended brokers can help you sell short and offer educational support. From eTrade short selling to Moomoo, Interactive, Schwab and more, you can test the market, learn how to short sell and diversify your portfolio.

Reap the benefits of liquidity and start short selling today.

Frequently Asked Questions

Q

Are there risks of short selling?

A

The risk of short selling is the stock price goes up and you must cover the position at a higher price (taking a loss).

Q

What is the role of brokers in short selling?

A

Brokers serve as a middleman that allows you to borrow shares and they charge you interest.