Webull Short Selling
How to short sell on Webull? This article guides you through the Webull short selling requirements, in addition to the Webull review. It reveals how to short a stock using the Webull trading platform.
What is Short Selling?
Short selling is a speculative short-term investment strategy and mainly used by day traders. Short-sellers expect that the price of the shorted stock will fall. The idea is to short a stock at a higher price and to buy back those stocks at a lower price.
What are the Benefits of Webull Short Selling?
Short selling is an excellent addition to a day-traders trading strategy toolset. Within minutes, traders can make a significant amount of money shorting a stock at the right time to buy the shares back later a day for a lower price per share.
Does Webull Allow Short Selling?
Webull allows short selling. You can short stocks with leverage in your margin account. Also, some hard to borrow stocks are available on Webull.
What are the Webull Short Selling Requirements?
The Webull short selling requirements are to have a margin account at Webull, and a minimum net account value of at least $2,000.
What are the Fees Associated to Short Selling on Webull?
There is no fee for short selling stocks on Webull intraday as long as you close the position on the same day. You borrow the shares from the shorted stocks' lender(s), via Apex, Webull's clearing firm. You need to pay interest if you want to maintain a position overnight. If you shorted a stock during dividend dates, you need to pay the dividend to the lender of the stock.
How to Short on Webull?
Shorting a stock on Webull is simple and easy to do.
- Begin on your Webull app main screen clicking on "Watchlist.", or
- Search the stock you want to short on Webull.
- Check if you see a little blue downward arrow icon on the upper right corner of the page. If the icon is shown, you can click on it to short by using the Webull app.
What is the Margin Rate on Webull?
The margin rate is currently 6.99% for the first $25,000.00 and goes down to as low as 3.99% for margin loans of >$3,000,000.00. If you short 1,000 stocks worth $25,000 on Webull ($25 each), you pay $25,000*6.99%/360=$4.85 interest per day. On top, you pay additional fees for hard-to borrow shares. The Hard-to-borrow-rate is currently 6%. The calculation is a bit more complex: ((price per share * number of shares) * industry convention * hard to borrow rate / 360). In our example: (($25 * 1,000) * 1.02 * 6%)/360)=$4.25 per day hard-to-borrow-fees.
What are the Risks of Short Selling?
The main risk of short selling is that investors can lose more money than invested. For example, if you trade a 100 stocks long, and buy it for $10, your maximum risk is $10 * 100 = $1,000. The profit potential trading stocks on the long side is unlimited since any price above $10 is a profit. That's the case even if the price climbs to $1,000 per share. Therefore, when trading long, the risk is limited, and the profit unlimited.
Short selling is the complete opposite. If you short a stock for $10 per share and sell 100 stocks for $10 short, your profit potential is limited to 100*$10=$1,000. The risk is unlimited. Let's say you use short selling on Webull and have an open position of 100 shares shorted for $10 each. The next day the company reports a merger or acquisition. The price per share at the open is $50. In this case, you lost $40 * 100 shares overnight, which equals a loss of $4,000.
Short selling stocks overnight without a hedge-protection is never a good idea. It involves unlimited risk, and it costs additional fees to maintain such a position overnight. However, short selling can be a highly profitable strategy when being used intraday with solid trade management and monitoring.