can you short stocks on ameritrade — full guide

Short Selling Stocks on TD Ameritrade (thinkorswim) / Charles Schwwab

This article answers the question “can you short stocks on ameritrade” and walks through how shorting works on TD Ameritrade’s thinkorswim platform now integrated into Charles Schwab. It covers account requirements, borrow mechanics, costs, regulatory limits, order types, risk management, alternatives, and a quick pre-trade checklist. This is educational information only and not investment advice.

Intro: quick answer and what you’ll learn

Yes — can you short stocks on ameritrade? In short: you can short marginable U.S. equities on the TD Ameritrade / thinkorswim platform (now part of Charles Schwab), subject to a margin account, borrow availability, and broker/regulatory rules. This guide explains the practical steps to place and manage short trades on the platform, typical costs and risks to expect, and alternatives if shorting direct shares is impractical.

Within the next sections you will learn:

• What short selling means and why traders use it.
• How TD Ameritrade’s shorting capability works now that it is integrated with Charles Schwab.
• Exact account requirements and approval steps you should expect.
• The mechanics of locating and borrowing shares, hard-to-borrow (HTB) issues, recalls, and forced buy-ins.
• Costs you may pay (borrow fees, margin interest, dividend payments, and other charges).
• Platform steps on thinkorswim / TD Ameritrade for opening and closing short positions.
• Risk-management best practices and alternatives such as options and inverse ETFs.

Overview of short selling

Short selling is selling borrowed shares with the expectation that the price will fall, allowing you to buy them back later at a lower price (buy to cover) and pocket the difference. A broker lends shares (or arranges lending) and holds collateral in your margin account while the position is open.

Traders use short selling for speculation or hedging. Speculators profit if prices decline; hedgers offset downside risk in long exposures. Shorting is broker-mediated — you do not own the shares you sold short and must satisfy the broker’s requirements for collateral and margin while the loan remains outstanding.

TD Ameritrade and Charles Schwab — corporate and platform context

As of November 2020, according to Charles Schwab’s public announcement, the acquisition of TD Ameritrade closed and the firms began integrating operations. thinkorswim continues to operate as an advanced trading platform under the Schwab umbrella, and short-selling services formerly offered by TD Ameritrade are provided via Charles Schwab’s infrastructure.

Practically, that means: account approvals, margin rates, and short-lending availability are handled under Schwab’s policies and thinkorswim trading screens. Platform features from TD Ameritrade’s thinkorswim remain available to active traders, with Schwab’s compliance and margin rules driving backend processes.

Can you short stocks on Ameritrade?

Short answer: yes. You can short marginable U.S. stocks using a TD Ameritrade / thinkorswim account now administered by Charles Schwab, provided your account is approved for margin and shorting and the shares are available to borrow.

Longer answer: availability depends on three main factors:

1. Your account type and approvals (margin enabled and short-selling permissions granted).
2. Whether the specific security is shortable (shares must be locatable and lendable).
3. Compliance with regulatory constraints (Regulation SHO, Rule 201 price tests, exchange-specific rules).

If any of these are not satisfied (for example, the stock is hard-to-borrow or the broker cannot locate shares), you cannot open a short position for that symbol on the platform.

Account requirements and approvals

Margin account requirement

Short selling requires a margin account. Because the broker lends shares, you must provide collateral (cash or eligible securities) and accept margin lending terms. A cash account does not permit short selling.

When you apply for margin/short permissions, the broker evaluates your financial profile, trading experience, net worth, and risk tolerance. Approval often involves signing a margin agreement and acknowledging short-selling risks.

Minimums, user eligibility, and trading permissions

Broker-specific minimums and thresholds vary. Common conditions you should expect:

• A signed margin agreement and acceptance of margin disclosures.
• Minimum account equity to open margin positions (check Schwab’s current disclosures for specific dollar thresholds).
• Pattern-day-trader rules (if you day trade and your account meets the PDT definition, additional minimum equity of $25,000 applies to equity day trading).

Schwab/thinkorswim may place additional risk-based limits on individual accounts, such as higher margin requirements for highly leveraged or concentrated positions.

Approval process and risk disclosures

Before granting short-selling privileges, the broker provides risk disclosures that explain unlimited loss potential, margin calls, and recall risks. Your account must be reviewed and approved for margin usage and short-selling permissions before you can submit sell-short orders.

How shorting works at the broker level

Locating and borrowing shares

Regulation SHO and broker policies require locating a source of borrowable shares before a short sale is executed. The broker locates shares either from its own inventory, from other clients’ margin accounts (where allowed), or from external lending markets.

A locate is an affirmative determination by the broker that the shares can be borrowed and delivered on settlement. If the broker cannot locate shares, you cannot initiate a short sale for that symbol.

Hard-to-borrow (HTB) and recalls

Some securities are hard-to-borrow (HTB) or have limited lendable supply. HTB securities typically incur higher borrow fees and may be subject to recalls. If a lender recalls shares, the broker may require you to cover (buy to cover) your short position or arrange a replacement loan. A recall can force an immediate close at adverse prices.

Brokers may mark certain symbols as non‑shortable in platform screens when borrow availability is insufficient.

No naked shorting policy

Brokers prohibit naked shorting: selling shares short without a reasonable belief that the shares can be borrowed and delivered. This is enforced by Regulation SHO and internal broker rules.

Costs and charges of maintaining a short position

Shorting involves several potential costs. Understand each before initiating trades.

Stock borrow fees

Borrow fees (stock loan rates) compensate the lender of the shares. Fees vary by security, supply-and-demand dynamics, and time. For highly shorted or low‑float names, borrow fees may be substantial and can change daily.

Borrow fees are charged while the short position is open and can materially reduce or eliminate expected profits on a trade if fees increase.

Margin interest

If you use borrowed funds or your account carries a debit balance due to margin activity, you pay margin interest. Margin interest is charged on borrowed cash balances and compounds while positions remain open. Rates vary by account size and broker tier.

Dividends and corporate actions

If a stock you short pays a dividend, you are responsible for paying an equal amount to the lender (a payment-in-lieu of dividend). Corporate actions such as splits or special distributions may also create cash or position adjustments you must satisfy.

Commissions, fees, and other costs

While many equity trades are commission-free, other fees may apply (exchange fees, regulatory fees). Forced covers due to recalls or margin liquidations can generate execution costs and slippage.

Some brokers may charge special fees for locating HTB shares or executing complex borrow arrangements.

Regulatory constraints and market rules

Regulation SHO and locate requirement

Regulation SHO requires brokers to have reasonable grounds to believe that the short shares can be borrowed and delivered on settlement. This locate requirement reduces failed settlements and naked shorting.

Short-sale circuit breakers / Rule 201

Rule 201 (the alternative uptick rule) can restrict short selling in a security that experiences a substantial intraday price decline. If a stock falls by a specified percentage from the previous close, short-sale price tests may apply and limit short selling beneath the short sale price test threshold.

These restrictions are automatic market mechanisms intended to reduce downward volatility.

Exchange-specific rules and threshold lists

Exchanges maintain threshold lists of securities with settlement failures or unusual activity. Being on a threshold list may affect shorting availability and could trigger additional settlement or reporting requirements.

Placing short orders on thinkorswim / TD Ameritrade platforms

Order types used for shorting

Common order types for shorting include:

• Sell short (to open a short position).
• Buy to cover (to close a short position).
• Stop‑loss (buy-stop) and trailing-stop orders to limit losses.
• Limit orders to control execution price when opening or closing.

When shorting, many traders use a combination of limit and protective stop orders to manage execution price and downside risk.

Platform features and checks

thinkorswim and TD Ameritrade screens typically show shortable status or lendability indicators for symbols. Look for platform flags such as “shortable,” “borrow rate,” or “HTB” on the quote or trade ticket.

The platform enforces pre-trade checks: if a symbol is not shortable or there is no locate, the sell-short order will be rejected or the platform will prompt you to accept conditional execution.

Step-by-step example workflow

A typical workflow to open a short position on thinkorswim:

1. Ensure you have an approved margin account with short-selling permissions.
2. On thinkorswim, check the symbol’s shortable status and any borrow-rate indicator.
3. Decide order type (e.g., sell short limit at $X) and size based on available margin and risk plan.
4. Enter the order as a “Sell short” order on the trade ticket and submit.
5. Monitor the position, margin usage, and borrow fees in your account’s positions or margin monitor.
6. When closing, place a “Buy to cover” order (limit or market) or use protective stop orders.

Note: platform screens and labels can change — always use the real-time platform information for shortability and borrow rates.

Managing risk and position maintenance

Margin maintenance and margin calls

Maintaining a short position reduces your account equity if the stock price rises. Brokers set maintenance margin requirements that you must satisfy every day.

If equity falls below maintenance requirements, the broker issues a margin call requiring you to deposit additional funds or liquidate positions. If you do not meet the margin call, the broker may liquidate positions, including long and short positions, without prior notice to restore required margin.

Brokers generally have the right to immediately close or reduce positions to manage risk.

Short squeeze and liquidity risk

A short squeeze occurs when rapid price increases force short sellers to cover, which can create further upward pressure and large losses for remaining shorts. Illiquid securities can amplify price jumps and slippage.

Because potential losses on a short are technically unlimited (price can rise without fixed limit), position sizing and stop discipline are essential.

Forced buy-ins and broker closeouts

If a lender recalls shares or borrow availability disappears, the broker may force a buy-in — closing your short position at prevailing market prices. Forced buy-ins can happen suddenly, especially for HTB names, and can produce outsized losses if liquidity is poor.

Brokers also reserve the right to liquidate positions to meet margin obligations or comply with lender recalls.

How long you can hold a short position

There is no fixed legal time limit for most short positions as long as the broker can maintain the borrow. Duration depends on:

• Continued availability of borrowed shares.
• Ongoing payment of borrow fees and margin interest.
• The broker’s risk assessment and policies (recalls or forced buy-ins may shorten holding time).

If the borrow becomes unavailable or too costly, the broker may require you to close the position. Short positions can therefore be held for days, months, or longer, but are subject to operational and cost constraints.

Alternatives to direct shorting on Ameritrade

If direct shorting is unavailable or undesirable, consider alternatives that provide bearish exposure or hedging with defined risk profiles.

Put options and option strategies

Buying put options gives the right to sell at a strike price and is a limited-risk way to bet on a stock’s decline. Option spreads (e.g., bear put spreads) can reduce cost and define maximum loss.

Options require appropriate approvals and understanding of options mechanics (assignment risk, margin for option writers).

Inverse ETFs (for sectors/indices)

Inverse ETFs aim to deliver inverse daily returns of an index or sector. They provide short-like exposure without borrowing shares. Be cautious: many inverse ETFs are designed for short-term use and daily rebalancing effects can cause performance divergence over longer horizons.

CFDs / swaps (availability caveat)

Contracts for difference (CFDs) and other swaps can replicate short exposure in some jurisdictions but are generally not offered by U.S. brokers like Schwab. Confirm product availability and regulatory permissions before considering such instruments.

Short verticals and limited-risk strategies

Option-based verticals (e.g., short call verticals or put spreads) can offer defined risk/reward characteristics compared with naked shorting.

Practical considerations and best practices

Before initiating a short position on TD Ameritrade / thinkorswim, consider these practices:

• Position sizing: Limit exposure to a small percentage of account equity.
• Pre-trade checks: Confirm a locate/shortable status and estimate borrow rates.
• Stop placement: Use protective stops or options hedges to limit catastrophic losses.
• Fee monitoring: Track daily borrow fees and margin interest — large ongoing fees can erode returns.
• Contingency planning: Be ready to cover quickly if a borrow recall or margin call occurs.
• Documentation: Read the broker’s margin and short-sale disclosures and retain copies for review.

Keeping a trading journal and stress-testing scenarios (e.g., a 50% price spike) helps understand potential outcomes.

Common questions (FAQ)

Q: Is shorting allowed on all symbols? A: No. Only marginable, shortable securities with available borrow can be shorted. thinkorswim will indicate a symbol’s shortable status.

Q: What happens if the broker cannot locate shares? A: If the broker cannot locate shares, it will reject sell-short orders or mark the symbol as non‑shortable. You cannot open a short position without a locate.

Q: Am I responsible for dividends when shorting? A: Yes. Short sellers must pay any dividends declared during the short position to the lender.

Q: Are penny stocks treated differently? A: Many low-priced or microcap stocks are hard to borrow, have limited liquidity, and may be restricted by broker or exchange rules. Exercise caution and consult broker disclosures.

Q: Can my short be open forever? A: Not necessarily — holding depends on borrow availability, borrow fees, margin capacity, and broker policies. Recalls or cost spikes can force earlier closeouts.

Risks summary and legal/disclosure notices

Short selling carries significant risks, including unlimited loss potential, borrow fees, margin calls, forced buy-ins, and adverse tax/timing consequences. The mechanics described here are informational and subject to change by brokers and regulators.

Before shorting, review Charles Schwab / thinkorswim margin and short-sale disclosures, read Regulation SHO and Rule 201 guidance, and consider seeking independent financial, tax, or legal advice. This article does not constitute investment advice.

References and further reading

Sources to consult for up-to-date, authoritative guidance include broker short-selling and margin disclosures and regulatory resources on Regulation SHO and Rule 201. For historical corporate context: as of November 2020, Charles Schwab announced the completion of its acquisition of TD Ameritrade (company disclosure).

(For platform-specific screens and current borrow rates, always check your live thinkorswim account. Broker policies and prices change frequently and platform labels are the definitive source of shortability status.)

Appendix

Glossary of key terms

• Sell short: Opening a position by selling shares you do not own, borrowing them from a lender.
• Buy to cover: Buying shares to close a short position.
• Borrow fee / stock loan rate: Fee charged for borrowing shares.
• Hard-to-borrow (HTB): Security with limited lendable supply and higher borrow costs.
• Locate: Broker’s confirmation that shares can be borrowed for a short sale.
• Margin call: Broker request to deposit funds or collateral to meet margin requirements.
• Short squeeze: Rapid price rise forcing short sellers to cover, amplifying price moves.
• Regulation SHO: U.S. SEC regulation governing short sales, including locate requirements.
• Rule 201: SEC rule that imposes short-sale price tests after large intraday price moves.

Quick checklist before initiating a short

• Confirm your account is approved for margin and shorting.
• Verify the symbol is shortable in thinkorswim and check any HTB flag.
• Estimate potential borrow fees and ongoing margin interest.
• Set protective stops or hedges and define maximum loss.
• Ensure you have adequate buying power to meet potential margin calls.
• Be ready to act if a borrow recall or forced buy-in occurs.

Further practical note for crypto traders and Bitget

This guide focuses on shorting U.S. equities via TD Ameritrade / thinkorswim under Charles Schwab. If you are also managing crypto exposure or exploring derivatives and Web3 tools, consider using dedicated crypto platforms and wallets optimized for margin and derivatives. For example, Bitget provides derivatives and spot products designed for crypto traders and a dedicated Bitget Wallet for Web3 asset management. Explore Bitget’s educational resources and wallet options if your strategy includes crypto instruments.

Final guidance: proceed with caution and stay informed

Short selling on TD Ameritrade / thinkorswim is possible but conditional on margin approval and borrow availability. Carefully evaluate borrow costs, regulatory constraints, and your margin capacity before initiating trades. Use the platform’s real-time shortability indicators and read the broker’s most recent disclosures to make informed operational decisions.

If you’d like a one-page printable checklist or a step-by-step thinkorswim shorting walkthrough formatted for print, request a printable guide and we will draft it for you.