Questions about Short selling
Here’s a summary of the main issue and the solutions discussed regarding the user’s inquiry about short selling:
- Main Problem: The user is unsure about the fees associated with short selling, particularly for hard-to-borrow stocks, and why the app indicates there are 0 shares available to borrow for the stock $MLGO.
- Solution – Fees Explanation: Most securities can be sold short without fees, but hard-to-borrow securities may incur interest charges based on market conditions. The estimated annual interest rate will be displayed when placing a short sale for HTB stocks.
- Solution – Margin Account Details: Fidelity’s margin borrowing costs follow a tiered structure, with rates potentially changing based on the interest rate environment. Users can find detailed information about commissions and margin rates on Fidelity’s website.
- Additional Resources: The user is provided links to FAQs on margin, how to short stocks, and further information about margin and short selling to help clarify any remaining questions.
Here’s the full thread
Hello, I just got my account approved to enable margin and I just wanted to know if I want to short sells, how much fee would I incur in commission-fee, interest fee, or any other tradee-related fee especially for hard to borrow stocks? I don’t know if a fidelity issue but the app said the estimated amount of available shares to borrow is 0? I understand the stock is HTB but why is it 0? The stock in question is $MLGO. Also, I was looking through the app to see the short sell option and just below Time In Force option, there’s a type to choose between Cash & Margin. I am pretty confident if im short selling, the default option would be to choose Margin type. However, what if I chose cash type? Does it change anything?
I’d appreciate your response. Thanks!
Happy Monday, @Messi10.
Most securities can be sold short without a fee or interest. However, some securities may become hard to borrow at times and require paying interest on the borrowed shares. In general, Fidelity looks at three points to determine if a stock is considered hard to borrow: the number of shares outstanding, the availability of the shares in the stock loan market, and the prevailing interest rate environment.
When a trade is entered for a hard to borrow (HTB) security and the action “Sell Short” is selected, our system will show the estimated annual interest rate on the trade ticket. The short interest rate for hard to borrow short positions is based on conditions in the stock loan market and can change on a daily basis. Conditions include the number of shares outstanding, the availability of the shares in the stock loan market, and the current interest rate environment.
You can find the fees for borrowing within a margin account on the page linked below. Margin borrowing costs are based on a tiered structure, and the rate is reduced as the amount borrowed increases. Please keep in mind that margin rates may change based on the current interest rate environment.
Commissions, Margin Rates, and Fees: https://www.fidelity.com/trading/commissions-margin-rates
Here are a few additional resources for you to check out for more information on margin and selling short.
Margin FAQs: https://www.fidelity.com/trading/faqs-margin
How to short stocks: https://www.fidelity.com/viewpoints/active-investor/selling-short
Margin and short selling can be complex topics so please feel free to let us know if you have additional questions. 🟢