To The Moon

An ordinary stock trade usually goes:

Buy first, then sell after the price rises.

That is going long. Short selling reverses the order:

Borrow the security and sell it first, then buy it back later and return it.

Important: This material is provided for general educational and informational purposes only and does not constitute financial product advice, investment advice, or a recommendation. Margin lending, short selling, and other leveraged trading strategies involve significant risks and may not be suitable for all investors. Losses may exceed your initial investment. Before investing, consider whether the product is appropriate for your objectives, financial situation and needs, and read the relevant PDS and risk disclosures.

A simple example

Suppose a stock currently trades at USD 100. An investor borrows the stock and sells it at USD 100:

• if it later falls to USD 80 and is bought back and returned, the spread may be a USD 20 gain;

• if it later rises to USD 130 and is bought back and returned, the loss may be USD 30.

A stock's rise has, in theory, no upper bound — so the potential loss on a short position may keep growing.

The cost of shorting is more than the price spread

Beyond price direction, short selling involves several costs and conditions that are easy to overlook:

• A margin account is required: short selling is only available to margin accounts; a cash account must be upgraded first. If your account is already a margin account but you still cannot short, please reach out to our Client Service via clientservice@tigerbrokers.com.au or 02 9169 6999. Upgrade to Margin Account now

• Stock borrow interest: interest is payable for the period the security is borrowed.

• Dividend compensation: if the underlying pays a dividend while you are short, you must compensate the original holder for that dividend.

• Insufficient margin leads to forced liquidation: the same as buying on margin.

• Short margin requirements are usually higher: margin requirements for shorts may exceed 100%. Taking AAPL as an example, the long initial margin rate is 30% and maintenance 25%, while the short initial is 35% and maintenance 30%.

Want to know whether a stock can be shorted?

Check the top-right corner of the stock's quote page for the margin/short-availability marker.

A historical case: GameStop

In January 2021, GameStop and other "meme stocks" experienced significant price volatility, surging volumes and intense market attention. The SEC subsequently published a dedicated report examining the episode and its implications for individual investors and market structure.

For short sellers, a rapid price rise may force them to buy the stock back at higher prices, producing what is known as a short squeeze.

A margin account can give eligible users the ability to short, but not every security can be shorted. Whether a security is shortable depends on factors including:

• the supply of borrowable securities (the shortable pool);

• margin requirements;

• market conditions;

• account eligibility and trading permissions.

Key takeaway

Shorting adds a choice of direction, but it brings risks that differ from an ordinary long position — rapid price rises and changes in borrowable supply deserve particular attention.

Further reading (Help Centre)

• What is short selling

Quiz

Suppose you short 10 shares at USD 100 each. The stock then rises to USD 130, and you buy the shares back to close the position.Ignoring interest and other fees, what is the result?

• A. A USD 300 gain

• B. A USD 300 loss

• C. A USD 1,000 loss

• D. No loss, because the shares were borrowed

Drop your answers below and tell us why 👇 for a chance to win some Tiger Coins [Allin][Allin] Rewards are limited, so get in early![USD][USD].

Upgrade to Margin Account now and enjoy a limited-time offer: successfully open a margin account to receive 10 brokerage-free trades + 2,000 Tiger Coins*. Tiger Coins can be used to redeem vouchers, merchandise, and more.

*Min. brokerage waived. Third-party trading fees and other fees still apply. The card is valid for 60 days. See T&Cs . Trading in derivatives or leveraged financial products involves significant risks, including the risk of losses exceeding initial investment, and may not be suitable for every investor.

Upgrading to a margin account provides access to a broader range of tools and features. Whether to use these features should be considered carefully based on your investment objectives, financial situation, trading experience, and risk tolerance. For more details on margin account features, currency-specific interest rates, and fee schedules, please visit the Margin Account page and Pricing page, Help Centre and our Risk Disclosure.

This material is provided for general information purposes only and does not constitute financial product advice, investment advice or a recommendation. This information does not take into account your objectives, financial situation or needs. Any securities mentioned are provided for illustrative purposes only and do not constitute a recommendation, solicitation or endorsement. All investment products carry risk and are not suitable for all investors. Margin lending and short selling carry a high level of risk and may not be suitable for all investors. If the value of your collateral falls or your position moves against you, Tiger Brokers (AU) may be required to sell your holdings or close your positions without prior notice to meet margin requirements or limit potential losses. Rates, margin requirements, product features and eligibility criteria are subject to change, and the information available on the Tiger platform and official website at the relevant time will prevail. Before trading, please read the relevant PDS and T&Cs, ensure you fully understand the risks involved, and seek independent professional advice where appropriate.