How to sell short on etrade
How to Short Stock in Etrade
okay what we're gonna do now is we're to
look at how to short stock in each raid
how to short stock in a trade if you
know it shorting stock is then ignore or
just skip the next minute but when you
short stock what you do is you borrow
the stock and sell it immediately for an
immediate gain and then you buy the
stock back later
hopefully the stock has fallen so let's
look at an example let's go to
interactive Interactive Yahoo charts and
let's look at Yahoo because I believe
yahoo has fallen
yeah so let's say back here in February
or in January you shorted Yahoo what
that means is you bought Yahoo when it
was trading at $44 and you sold it
immediately okay so maybe you did you
maybe you shorted one share and got 44
dollars in your account or maybe you
shorted a hundred shares I got four
thousand four hundred dollars in your
account in either case you get the money
in your account but you need a margin
account to do so because you're
borrowing the stock from someone from
the broker for example then you're
selling the stock and you're hoping that
the stock falls maybe all the way down
here and then you buy it back and give
it back to whoever you borrowed it from
okay so just imagine as like imagine you
borrow a car and then you give it back
later but the person you borrowed it
from doesn't know what you did with the
car so you borrowed the car and you sold
it for a nice twenty thousand dollars
and then you bought the car back a year
later for fifteen thousand dollars and
you gave it back to your friend who let
you borrow it now your friend isn't any
isn't isn't the wiser he doesn't know
what happened but you know that you made
five thousand dollars on that trade you
borrowed a car sold it for twenty
thousand dollars bought it back for 15
thousand dollars gave it back to your
friend now of course the car depreciates
in value but a stock doesn't stock is a
stock so when you give it back the
broker doesn't know that it's different
stock get the idea okay anyway even if
you don't get the idea if you're at this
video I'm assuming you want to
short I'm a stock so I'm going to show
you how to do it and it's basically in
each raid it's the same as buying a
stock go up to trade don't click on
anything just go up there and put the
cursor above trade move over to place a
trade and click on stocks it's going to
bring this to this page order type what
we're doing is a sell short we're
selling the stock and we're selling it
short which means we don't have the
stock we don't own the stock we just
want to sell it even though we don't own
it so we're doing that exact process I
described we're borrowing a stock
alright
so let's say we want to sell short 100
shares of AIG it's the exact same as
purchasing a stock now price type again
we want to go with limit if you didn't
see the video on buying a stock in an e
trade you can watch that or you can just
follow along with me the limit is simply
telling the broker telling each raid
that you don't want the worst price if
you want the worst price go with market
it's easy it'll be filled automatically
but you generally want to get the best
price for whatever you're doing for your
money because you have to have a margin
account to actually short a stock if you
don't have this option right here sell
short that means you need to contact
each trade and say you want to be able
to short stock and they will say ok we
need to upgrade your account to a margin
account don't worry about the jargon
just know that if you don't have this
option you got to call you trade and get
that option ok so I'm going to do a
limit price and again the ask in the bid
represent what people want to buy it for
and want to sell it for inversely
respectively I'm sorry let me say that
again the bid is the price that people
are wanting to buy AIG for and the ask
is the price that people are wanting to
sell AIG for now obviously because you
want to sell you want this price but
you're not going to get it the buyers
don't want to buy it at that price
instead they want to buy it in in in
somewhere that's more reasonable for
them now you see 100 here and 100 here
that means the number of people who are
bidding on it and it just happens to be
exactly equal so there's a hundred
people who say they want to sell AIG at
64 bucks and 100 people who say they
want to sell it at 62 bucks now I'm
going to tell you the easiest way to get
any trade filled at a decent price is
simply take the average of these two and
the easiest way to do that is just add
them so I've done this already what it
looks like it change since I've done it
okay oh no it hasn't
okay so this is the ask price 6e 4.16
plus the bid price sixty two point
thirteen and then you divide it by two
and you get the price that you should
put in now because we're dealing with
dollars and we only have ten pennies for
ten ten cents we can't go in
we can't go you know out to the third
digit there we got a round so I'm gonna
round up and just say the limit price is
sixty three point one five and you don't
want to choose good for the day
generally you only have two options good
for the day or extended hours good for
the day
the only difference is that the extended
hours goes after the market closes ah
you could do either one I just figure
you're probably gonna trade while the
markets open so go for good for the day
and here you have it this is the entire
setup you just click on preview order go
through with the order and your your
account will have a bit of money not
taken from it but held in some place
that's the margin so the money you're
holding aside is kind of like insurance
for each rate in case the trade goes
really wrong because when you short
stock you expose yourself to unlimited
risk it's very possible that you can go
bankrupt on one trade I have previously
lost a lot of money shorting stocks so
be very careful but the idea here is
what you're doing is you're borrowing
AIG in this trade you're borrowing a
hundred shares of AIG and you're selling
them at sixty three bucks each so you're
immediately going to gain sixty three
hundred dollars in your account
and you're going to wait for a ID to
drop and then you're going to buy it
back let's say you buy back at 60 per
share you buy 100 back 60 per share so
how much money did you make well you
made 300 bucks on that trade and you
didn't even have AIG to sell so this is
great if you know that a stock or if you
suspect that the stock is going to fall
most people are just looking for buying
opportunities but if you're watching
this video you're pretty smart because
you're looking at both directions
however I'll say it again when you short
a stock there's unlimited risk Yahoo for
example after you short it right here
Yahoo could have maybe invented a new
form of the internet or cured cancer or
something weird like that
shooting Yahoo stock up to like a
million dollars a share and then you
would be bankrupt unless you're already
very wealthy you know so that's the idea
here
again this is what it should look like
sell short whatever your quantity is
whatever the ticker is limit trade
always limit the price which is halfway
between the asking the bid and then good
for the day that's it
preview order you're done
