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Interactive Brokers Shorting Requirements, IBKR Short Locates, & Cost. How to Short Sell Stocks on Interactive Brokers in 2022



Shorting Stocks at Interactive Brokers


Did you know that it’s possible to make money when an asset goes down in price? With a little-known tactic called shorting—and the right software—you can reap profits while other traders are losing. Interactive Brokers has the tools you need for this type of trading. Here are the details:


Placing Bearish Trades at Interactive Brokers


To find a stock to short, you can use IB’s equity screener. There’s one on the client portal, which is the web-based trading platform, and another one appears on the company’s desktop platform.

If you already know the security you want to short, just type in the ticker symbol in the quote box (appearing at the top-right of the browser platform and on the order ticket of the desktop program).

Once you have the quote details pulled up, you’re ready to fill out the order ticket. Although the interfaces are different on the two computer platforms, short sales can be placed on either system.

On the client portal, just click on the red Sell button. This will bring up the order form. You can choose to place your trade either in dollar amount or share amount. If you choose the former, you won’t be able to use a bracket order, which Interactive Brokers recently added to the client portal.

The advantage of placing short sales with bracket orders is that you don’t have to worry about the possibility of an infinite loss. There is a stop-loss order to take you out of the trade if the price rises too high.

On the desktop platform, you need to first select the Sell button on the order ticket. The background color will change to red, indicating a short trade. To add a bracket order, click on the Advanced tab and select Attach Stop Loss/Profit Taker/Bracket. It’s possible to select just a stop-loss or take-profit order, or both. The stop order can be set up as a market or stop limit order. Both order types can be routed to specific market venues.

It’s also possible to submit sell orders on the Interactive Brokers mobile app. It is very similar to the client portal’s trade ticket and includes bracket orders.


Locating Shares to Short


To verify that a stock is available for shorting, just enter its ticker symbol on the client portal and a green dot will appear below the trade buttons with the quantity of shares available for shorting. The number is hyperlinked; if you click on it, you’ll get a pop-up window with more details, such as the current borrow rates for that stock and the number of lenders who currently have inventory in it.

On the day we did our research, Uber had 36 million shares available for shorting from 17 lenders.


IBKR Shorting Stocks


Other Bearish Trades at Interactive Brokers


If stocks and ETFs don’t do it for you, there are several other asset classes at Interactive Brokers that can be sold short. Forex, futures, bonds, and options are all shortable at the firm, and the same platforms we just looked at can be used to submit short sales for these products.

The client portal can be used to buy put options. Long puts are a bearish trade. Bearish spreads are not integrated on the client portal, but the desktop platform does have them. Straddles and strangles are two spreads we found that make money when the price of the underlying stock goes down.


Alternative


For short selling a great alternative broker is Webull. It has a number of advantages over Merrill Edge: $0 commissions on options trades, and easier to learn trading tools.


Webull Promotion



Open WeBull Account



Fees Associated With Shorting


Interactive Brokers pays accounts interest when they have short sale balances that exceed $100,000. It is one of the few brokerage firms to actually pay customers for short sales.

The rate of interest is the effective Federal Funds rate (currently 0.09%) minus a variable rate that ranges from 1.25% to 0.25%. Obviously, this results in a negative interest rate right now because the Fed Funds rate is so low. When the rate comes back up, short sellers at IB can start to earn interest once again.

Interactive Brokers does not charge any special fees or commissions on short sales, and its IBKR Lite pricing schedule has $0 trade fees on US-listed stocks and ETFs.


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