can your stocks go negative

This guide explains whether can your stocks go negative in two senses: asset prices falling below $0 (they can’t for ordinary equities) and investor account balances becoming negative due to margin...

2026-01-13 01:06:00

By Lily Wong

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Can Your Stocks Go Negative?

Investors frequently ask "can your stocks go negative" when markets turn volatile. This question has two distinct meanings for U.S.-style equities and related products: (1) can a quoted share price fall below $0, and (2) can your account balance or position produce a negative cash/equity balance that you must repay? Short answer: a listed stock’s market price cannot be negative — it can fall to zero — but under leverage, short selling or certain derivatives, an investor’s account can become negative and they can owe money.

This article explains the mechanics behind each meaning, the typical market and broker responses, real-world exceptions (including non-equity instruments), and clear risk-management steps you can take. If you trade or plan to use margin or derivatives, read the sections on margin, short-selling and negative-balance protection carefully.

As of 2026-01-21, per CoinDesk reporting on market structure and 24/7 trading trends, continuous markets and tokenisation are changing settlement and liquidity patterns. Those structural shifts matter for risk and margin processes over time, but they do not change the basic legal and economic reasons why ordinary equity prices stop at zero while account liabilities can go negative.

Definitions and key concepts

Before diving deeper, here are clear definitions of terms used in this article so you can follow later sections without confusion.

Stock price / market price: the last traded or quoted price for a share on an exchange. It reflects buyers’ and sellers’ valuations at a moment in time.
Market value: the total value of a holding (price × shares). It can reach zero but not negative for standard equity shares.
Cash account: a brokerage account where you trade using only settled cash. Losses are limited to invested capital in a long-only cash account.
Margin account: a brokerage account that allows borrowing from the broker to increase buying power. Margin amplifies gains and losses and can produce obligations beyond invested capital.
Short selling: selling borrowed shares with the obligation to return them later. Losses on short positions can be unlimited if the share price rises sharply.
Derivatives: financial contracts whose value derives from an underlying asset (options, futures, CFDs, swaps). Some derivatives and leveraged products can produce losses exceeding initial collateral.
CFDs (Contracts for Difference): OTC products that allow leveraged exposure; they can generate negative balances if losses exceed collateral unless negative-balance protection exists.
Negative-balance protection: a broker policy or regulatory requirement that limits a retail client’s obligation to zero in extreme moves; availability varies by broker, jurisdiction, and product.

Important distinction: the asset price (what the market quotes for a share) and an investor’s account/liability are separate. Even though a share cannot trade for less than $0, investor accounts can become negative when borrowing or derivatives are involved.

Can a stock’s price go below zero?

Short answer: no — a stock’s quoted market price cannot fall below $0. The fundamental reason is straightforward: a price below zero would mean sellers pay buyers to take shares, which does not occur for ordinary equity on regulated exchanges.

When a company’s business fails, its equity can become worthless. That is reflected by the market price approaching zero and, after bankruptcy or delisting procedures, the share may cease trading or be listed at $0 for practical purposes. But it does not become negative.

Reputable financial explainers and regulators note the same conclusion: investors in long, cash-financed stock positions can lose all invested capital but typically owe nothing beyond that principal on the position itself, absent margin or other borrowing.

Why equity prices stop at zero

Market mechanics: Exchanges match bids and offers; the lowest possible public quote is $0.00. There is no routine auction or continuous trading mechanism where the price goes below zero for standard equities.
Economic logic: A negative price would require a market participant to accept payment to take ownership of a share. For equities, ownership represents a residual claim on a company’s assets and future profits — at worst it is worthless, not a liability.
Bankruptcy and delisting: When a company becomes insolvent, common shares are subordinated to creditors and typically become worthless. Shares may be delisted and trade on OTC or be canceled. Equity holders’ losses are limited to lost investment value — they are not required to pay to hold shares.

When and how an investor can owe money

Although share prices cannot be negative, investors can still end up owing money. There are three primary pathways:

Margin borrowing (leveraged long positions)
Short selling (selling borrowed shares and later buying them back at higher prices)
Trading derivatives or leveraged products (CFDs, futures, perpetual swaps, options) where losses can exceed posted collateral

These exposures allow losses to exceed the cash invested and can produce negative account balances when markets move faster than risk controls or when forced liquidations do not fully close positions at acceptable prices.

Margin accounts and margin calls

In a margin account, a broker lends you funds to buy securities. The borrower posts margin (collateral), and the broker sets initial and maintenance margin requirements.

Initial margin: percentage of the purchase you must fund with your cash or securities.
Maintenance margin: minimum equity you must maintain. If your equity falls below the maintenance level as prices decline, the broker issues a margin call requiring you to deposit cash or securities.
Forced liquidation: If you fail to meet a margin call, the broker has the contractual right to liquidate positions without prior consent to restore required equity.

Rapid price drops can cause forced liquidations that do not fully cover borrowed amounts — especially in thinly traded stocks or during market dislocations — leaving an investor with a negative balance that they must repay to the broker. Firms and regulators expect clients to repay negative balances; brokers may pursue collection or offset balances across accounts.

Regulatory and broker-specific examples: FINRA rules and broker margin agreements govern margin mechanics. Brokers often publish margin schedules and liquidation policies in account agreements; read those before using leverage.

Short selling risk

Short selling involves borrowing shares and selling them into the market, hoping to buy them back later at a lower price to return to the lender.

Key points:

Loss potential is theoretically unlimited: if the share price rises without bound, the short seller must still buy back and return the shares at whatever price prevails.
Margin is required for short positions. Rising prices force higher margin and can prompt margin calls. If the short seller cannot meet margin requirements, the broker can buy in the shares, and losses can exceed initial capital.
Short squeezes and rapid rallies can produce very large, quick losses and may create negative balances.

Derivatives, CFDs, futures and leveraged products

Derivatives and leveraged products allow exposure larger than posted collateral. Examples include futures contracts, options, CFDs and crypto perpetual swaps. These instruments can create losses beyond initial deposits for several reasons:

Mark-to-market (MTM) and daily settlement on futures can force margin top-ups instantly.
CFDs and some OTC leveraged products can leave clients exposed to the counterparty and to margin calls; unless the broker offers negative-balance protection, clients may owe more than they deposited.
Crypto perpetuals and inverse products have experienced dramatic liquidations in fast markets, producing negative balances for some traders before exchange or broker systems could close positions.

Important practical note: most regulated U.S. retail brokers restrict CFDs and certain OTC leveraged products. However, international platforms and certain crypto derivatives providers may expose traders to different risk models and may not offer the same legal protections.

Broker practices and negative-balance protection

Broker responses to negative balances vary:

Forced liquidation: brokers will typically liquidate positions to cover debts as soon as margin shortfalls are detected.
Recourse: if liquidations do not recover owed amounts, the broker can demand repayment and may pursue legal collection.
Negative-balance protection: some retail platforms explicitly limit client liability to zero under certain conditions and will absorb uncovered losses. The availability and terms differ by broker, account type, product type and jurisdiction.

If avoiding the risk of owing money matters to you, choose account types and intermediaries with explicit protections and fully understand the margin agreement.

What happens if a company goes bankrupt or a stock hits zero

When a company is insolvent, U.S. bankruptcy law typically governs the process through Chapter 11 (reorganization) or Chapter 7 (liquidation). Equity holders are residual claimants and are low in the priority of claims.

Priority of claims (simplified):

Secured creditors (banks with liens)
Unsecured creditors (suppliers, bondholders)
Preferred shareholders
Common shareholders

Common shareholders are last. In many bankruptcies, creditors recover some value while common equity is canceled or becomes worthless. That is why a share’s market price can approach $0: the economic value of the residual claim has vanished.

Delisting: Exchanges delist companies that fail to meet listing standards. After delisting, shares may trade OTC with low liquidity and high spreads; practical value often disappears.

For a long, cash-financed equity holder, a bankruptcy that reduces equity value to zero generally does not create further debt obligations tied to that position. Your loss is the investment in the shares, not a negative price for the shares themselves.

Special cases and exceptions

While ordinary equities cannot trade at negative prices, there are notable exceptions in other instruments and rare technical situations.

Commodities futures: Some commodity contracts have traded at negative prices under extraordinary market stresses. The most cited example is the WTI crude oil futures contract that briefly moved negative in April 2020 due to storage scarcity and delivery mechanics.
Exchange or technical glitches: Occasionally, errors or fat-finger trades create anomalous quotes that are later canceled or corrected. Exchanges have rules to nullify clearly erroneous trades.
Crypto assets: Spot crypto tokens can decline to zero if their protocol or token economics fail. Crypto derivatives have produced negative account balances in extreme volatility — a topic covered heavily since crypto derivatives became popular.

These exceptions highlight that the asset type and contract terms determine whether negative pricing or negative balances can occur.

Crypto comparison and 24/7 markets

Tokenised markets and continuous trading change settlement and margin patterns. As CoinDesk observed, 2026 is a structural inflection point toward more continuous, tokenised markets. Continuous settlement can compress the time available to adjust collateral and may increase operational demands for real-time margin management.

In crypto markets:

Spot tokens can go to zero if demand and utility collapse. That is equivalent to equity going to zero.
Crypto derivatives and perpetual swaps have produced extreme forced liquidations and, in some instances, negative balances. The speed and 24/7 nature of crypto markets can make margin events faster than traditional equity markets.

If you trade tokenised or crypto products on Bitget or other platforms, understand product-specific margin and insurance mechanisms. Bitget’s platform features risk controls and product descriptions; if you use Bitget Wallet for custody, review its security and operational guidance.

Risk management and prevention

To manage the risk that you will owe money, take practical steps before and during trading:

Use a cash account for long-only exposure if you want to limit risk to principal. In a cash account, you cannot borrow to buy securities.
Understand your margin agreement and broker liquidation policy. Know initial and maintenance margin percentages.
Limit leverage. Smaller leverage reduces the speed at which margin is consumed by adverse moves.
Keep a cash buffer in your margin account to meet possible margin calls quickly.
Use stop-loss orders to limit downside. Note: stop orders may gap in fast-moving markets and are not guarantees.
Hedge using options (e.g., buying puts) to cap downside on large positions. Options have costs and require understanding of greeks and expiry.
Diversify positions to reduce single-stock concentration risk.
Prefer brokers that offer explicit negative-balance protection if you want to limit post-event liability; read terms carefully because protections may exclude certain products (e.g., OTC CFDs) or extreme market events.
For crypto or tokenised assets, be mindful of 24/7 market hours and additional operational requirements for continuous collateral management.

Regulatory and legal considerations

Several regulatory and legal points are relevant:

FINRA and SEC: In the U.S., brokers and margin lending practices are subject to FINRA and SEC rules. Brokers maintain margin requirements and must disclose risks.
SIPC: The Securities Investor Protection Corporation (SIPC) protects against broker-dealer insolvency up to certain limits but does not cover trading losses or negative balances from trading activity.
Broker contract: Your contractual agreement with the broker governs margin calls, forced liquidation and remedies. Read the margin agreement and disclosure documents.
Jurisdictional differences: Protections and available products vary by country. CFDs are widely used outside the U.S. and can expose traders to different rules; some jurisdictions require negative-balance protection for retail clients.

Understanding the legal framework helps you know what protections apply and what obligations you accept when opening leveraged accounts.

Historical examples and illustrations

Corporate collapses: Numerous public companies have seen equity value evaporate in bankruptcy, leaving common shareholders with losses and no further liabilities tied to share ownership. These episodes demonstrate that common equity can go to zero but not negative.
Negative oil futures (April 2020): The WTI crude futures contract traded negative briefly because of delivery constraints and lack of storage, illustrating how physical-delivery contracts can trade negative in extreme circumstances. This example is of a futures contract, not a standard corporate equity.
Crypto liquidations: In several crypto market crashes, leveraged positions were liquidated en masse. Some participants experienced negative balances before exchanges' insurance funds or backstop mechanisms covered shortfalls. These events show how fast-moving, 24/7 markets can outpace some risk controls.

These cases are illustrative: they show mechanics and edge cases rather than routine outcomes for ordinary stock investors.

Common FAQs

Q: If my stock goes to $0 do I owe anything? A: For a long position in a cash account, you do not owe money simply because a stock hits zero. Your loss is the invested capital in that stock. You may owe money if you used margin or other borrowing to buy the stock.

Q: Can I ever lose more than I invested? A: Yes — if you use margin, short-sell, or trade leveraged derivatives, losses can exceed your initial capital and produce a negative account balance.

Q: Do all brokers allow negative balances? A: Broker policies differ. Some brokers explicitly provide negative-balance protection for retail clients and certain products; others reserve rights to pursue repayment. Always read your broker’s terms.

Q: Can crypto behave differently? A: Yes. Spot crypto can go to zero. Crypto derivatives, traded 24/7 and often highly leveraged, have on multiple occasions produced negative balances for traders in extreme moves.

Practical checklist before using leverage

Know your account type (cash vs margin).
Read and understand the margin agreement and liquidation policy.
Set a maximum leverage level you are comfortable with.
Enable price and margin alerts on your platform and mobile device.
Keep a cash buffer above maintenance margin.
Understand forced-liquidation rules and times of day when liquidity may be thin.
Consider brokers offering negative-balance protection if you want explicit limits on post-event obligations.
For crypto exposures, plan for 24/7 monitoring or lower leverage, given continuous trading hours.

More practical guidance and Bitget note

If you trade and want to reduce the risk of owing money, use a cash account for long-only equity exposure, limit use of margin, and prefer products with clear protections. For tokenised or crypto trading, choose platforms with transparent risk-management and consider custody options such as Bitget Wallet for secure asset storage. Bitget’s platform offers product documentation, margin schedules and risk controls — review them before trading.

Further explore Bitget’s educational resources to understand account types, margin policies and available protections. If you need continuous collateral management for tokenised assets, ensure your operational setup (alerts, settlement rails, and wallet custody) matches the demands of 24/7 markets.

Next steps: review your brokerage or platform’s margin agreement, check whether negative-balance protection applies to your account and products, and revisit position sizing and hedging strategies to limit the chance that can your stocks go negative in account terms.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.