M1 Finance Short Selling

M1 Finance Short Selling Stocks in 2022

Can You Sell Short at M1 Finance?

Unfortunately, M1 Finance does not offer an ability to short sell stocks and ETFs. You also cannot use options to bet against stocks with M1 Finance. For a free short selling, we recommend a $0-commission broker called TD Ameritrade (learn more).

Open TD Ameritrade Account

Open TD Ameritrade Account

What is Short Selling?

Short selling is when a trader borrows shares of a stock from their broker and then immediately sells those shares on the open market. The trader borrows the shares to sell at the current market price with the hope or expectation the price per share will drop. When the price has dropped the trader re-purchases the shares at the new market price to cover, or in layman terms, to return the shares to the broker. The trader then keeps the difference between the price the shares were sold for when borrowed and the price they were bought back for when the short was covered, which creates the profit in the trade. If the price goes up after the trader has borrowed and sold the shares the position still has to be covered and this is where the risk comes into short selling.

M1 Finance Sell Short

When is Short Selling Used?

Short selling is a great investment strategy in a bearish market or when an investor believes a specific stock has peaked. In a bearish market, many investors think you can only lose money and should run, but in reality, the exact opposite is true. There is plenty of profit potential and risk to reward potential if short selling strategies are on the mind of investors.

Not just ideal for bearish markets, but if a particular stock or even industry has peaked and a downward trend is inevitable the smart investor will ride that trend down by shorting the stock. Then when the stock bottoms out the same investor can go long the stock and ride the trend right back up, never getting out of the stock and riding its trends up and down.

Why Brokers Matter When Shorting Stocks

When shorting a stock, shares have to be available for the trader to borrow. Not all stocks, particularly small-cap stocks, have the ability to be shorted. A broker must have shares of the stock on hand for the trader to borrow and sell. Not all brokers have a large portfolio of stock available to short simply because the shares are not as abundant as larger mainstream stocks, of which most brokers will have many shares of. This is why the choice of broker is vital to the trader who intends to short sell stocks any time in the future. The size and volume of trades conducted on a daily basis by TD Ameritrade make them one of the best online brokers for short selling.

Open TD Ameritrade Account

Open TD Ameritrade Account

About the Author
Chad Morris is a financial writer with more than 20 years experience as both an English teacher and an avid trader. When he isn’t writing expert content for Brokerage-Review.com, Chad can usually be found managing his portfolio or building a new home computer.