Clever traders know it’s possible to profit from a falling share price.
With Trader Dealer and a covered short selling facility through Leveraged Equities you can make profitable trades even in a bear market.
Apply now to start short selling or call us on 1300 853 856 to speak to our friendly team.
- What is Short Selling?
- Benefits of Short Selling
- Risks of Short Selling
- Short Selling in Action
- How to Apply
- How to Place a Short Sell Order
- What it Costs
- Fine Print
What is Short Selling?
With a short sell transaction you sell securities borrowed from a lender, and purchase them back at a later date with the aim of profiting from a fall in the share price.
Your return will be the difference in price at the time of sale and the time of purchase. A fall in the security’s price means a profit for you (not taking fees or commissions into account), however if the purchase price is higher than the sale price you will incur a loss.
Benefits of Short Selling
Short selling offers great benefits for the savvy trader.
- Profit from a falling share price or a bear market.
- Hedge your portfolio against losses.
- Profit from both sides of the trade using a pairs trading strategy.
- Increase your profit potential using leverage.
Risks of Short Selling
- Because the price of a security you have short sold can increase by an unlimited amount, your potential losses are also unlimited.
- Your lender may ask you to make a payment, provide additional collateral or close out your short sale transaction before your planned timeframe.
- Because a short sell facility is a feature of a margin loan, it also carries with it the same risks as you would find with a margin loan.
Please ensure you read and understand the Leveraged Equities Short Plus Product Guide before proceeding with a short selling strategy.
Short Selling in Action:
- Imagine you would like to short sell $100,000 worth of
Your available cash: $20,000
Leveraged Equities requires a safety margin of 15% for this security:
Safety Margin = 15% of consideration ($100,000)
Safety Margin = $15,000
Your safety margin will be taken from your cash account.
- Open your short sell position
Your stock: -2000 BHP shares
@ $50 per share
Your profit: $0 Your available cash: $5,000
Sell 2000 BHP shares at $50 per share
- BHP shares drop to $49
Your stock: -2000 BHP shares
@ $49 per share
Your profit: $2000 Your available cash: $5,300
As the value of your stock decreases, the dollar value of the 15% safety margin is also reduced, and you are left with more available cash.
- BHP shares drop to $48: time to close your position
Your stock: - Your profit: $4000 Your available cash: $24,000
You close your short position by buying 2000 x BHP at $48 = $96,000
Note: the profit figure in this example does not include fees or interest charges.
For more examples of short selling in action, read the Leveraged Equities Short Plus Product Guide.
How to Apply
Opening a short selling account is easy: just complete our online application.
Note: your short selling transactions must be made through an account separate to your regular trading accounts.
How to Place a Short Sell Order
Once you have your short selling accounts set up, there are a few simple steps for placing your trade:
- Ensure the security you wish to short sell is on the Leveraged Equities Approved Short Plus list.
- Request authorisation for the trade directly from Leveraged Equities.
Phone: 1300 307 807
Your authorisation is valid for one day only, and you will be provided with an authorisation code.
- Call the Trader Dealer trading desk to place your short sell order, quoting your
Phone: 1300 130 545
- Advise Leveraged Equities of whether or not your trade has been completed, by 4.15pm the same day.
What it Costs
A $50 Leverage Equities Short Sell fee applies to every executed short sell transaction, in addition to your normal Trader Dealer brokerage fees.
- You must read and agree to the Leveraged Equities Short Plus Product Guide.
- Short sells must be on one contract note and can’t be split between multiple sell contract notes.
- A minimum trade value of $50,000 applies to short sell transactions.
- A short sell position can be open for a maximum of 11 months, 15 days.
- Minimum borrow is one day for authorised stock that has been short sold. Clients will incur interest on the borrowed stock for a minimum of one day.