Degiro short selling explained

What is short selling, and can you short stocks on DEGIRO?

DEGIRO Review

The short sale strategy is based on speculating that the price of a security or stock will decline. Only seasoned traders and investors should use this sophisticated approach. Investors or portfolio managers mostly use short selling as a cushion against the potential losses of a long position within an identical security or a comparable one. In contrast, traders might use it for speculation.

Simply put, your stockbroker will loan you the stock to short-sell it. The stock will originate from one of the customers of the brokerage firm, its inventory, or some other brokerage company. After you sell the shares then, only the user account receives the proceeds. You must eventually "close" the short by repurchasing the same quantity of shares and handing them again to your broker. You can repurchase the shares and profit from the difference if the price falls. If the stock price increases, you will have to repurchase it at the new price, which will cost you more money.

Yes, you can short-sell on DEGIRO. You will find this service in the name of Debit Securities, and it is open for Trader, Active, and Day Trader profiles. Securities that you can short-sell on DEGIRO are ETFs and equities from the major indexes on the given exchanges:

DEGIRO does not provide the option to short-sell category D securities or American assets.

Short selling of stocks on Degiro

You must first switch your Basic account to any of the profiles mentioned earlier if you do not already have a Trader, Active, or Day Trader profile. These options are located in the profile's "Trading settings" section. You must then pass two appropriateness tests, and you must also agree to the terms and conditions that follow.

Put a sell order in a stock you don't already possess to start a short position with your Trader or Active account. If the deal goes through, the short position will appear in your portfolio as a negative share count. You must place a buy order on the same amount of stocks you shorted to close the position. A product cannot have both a long position and a short position at the same time. Your current shares will be sold if you execute an order to sell on a stock in which you hold a long position.

Please be aware that changing a position from long to short requires a separate order. Before you may enter a short position for a particular stock, you must first exit the long position for that stock.

DEGIRO short selling stocks fees

Margin must be deposited into the user account while taking a short position, even though this is not a cost. You get the proceeds of the trade when you have a short position. As an illustration, if you sell ten shares of ING short for €100, €100 will show up on the user account. You'll also notice a position for ING with a quantity column value of -10 in your portfolio. Margin is necessary to protect against the possibility that you won't have enough cash on hand to purchase back these shares. The needed margin is determined by the product's worth and risk categorization.

In addition to margin, you must pay transaction expenses when you open a short position. You can view the DEGIRO's Fee Schedule to discover the fees associated with both buying and selling transactions. Expenses for shorting stocks are in addition to transaction costs. The product's risk level determines the short stock commissions.

Example of short selling for a profit

Consider a scenario where an investor believes that the XYZ Company is overvalued at $180 per share and will experience a price decrease. The investor would then be able to "borrow" 15 shares of XYZ from their broker and sell them for the $280 going rate. If the stock drops below $115, the investor may buy back the 15 shares at this price, return the shares they borrowed back to their broker, and receive a net profit of $975 ($2,700 – $1,725).