How Short Selling Works

Profiting when stocks go down

1

Borrow 100 shares of TSLA from your broker

2

Immediately sell them at the current price ($394/share = $39,400)

3

Wait for the price to drop

4

Buy back 100 shares at $300/share ($30,000)

5

Return the borrowed shares. Pocket the $9,400 difference.

Sell borrowed shares at $394=Buy back at $300Profit: $94/share

TSLA short interest

~3%

of float

Borrow fee

0.3-300%

annualized, varies

Max gain (short)

100%

stock goes to $0

the asymmetry

When you short, max gain is 100% (stock goes to zero). Max loss is UNLIMITED (stock can go to infinity). This is the opposite of buying, where max loss is 100%.

Check yourself

What is the maximum loss on a short sale?