In this video, we give you the rundown on how short selling works, the risks involved and safer alternatives for investing your money. ⏩Skip to the good stuff⏩ 00:00 Intro 00:10 What is short selling? 00:30 Is short selling legal? 00:53 How to short sell stocks 01:45 Benefits and risks of shrt selling 02:04 3 alternatives to short selling Read our guide 👉 https://www.finder.com/how-to-short-a-stock?utm_source=youtube&utm_medium=video&utm_campaign=investing&utm_content=guide&utm_term=guides Millions of Americans use Finder to help them make better decisions. We can help you too. We understand that making everyday life decisions such as finding a credit card, buying a home and saving for retirement can be daunting. That’s why we’re here. Our goal is to help you navigate those complex decisions by making them less of a chore (and hopefully less of a bore, too!) Visit us @ https://www.finder.com/ 💙 Follow Finder on: Facebook►https://www.facebook.com/finder/ Instagram►https://www.instagram.com/finderusa/ Twitter►https://twitter.com/finder VIDEO TRANSCRIPT: Hi! I’m Sheri Bechtel, editor for Finder.com’s share trading and investing channel — and I’m here to break down what exactly it means to short sell a stock. *What is short selling?* Short selling is an investment strategy you might take if you think a stock’s value will decline. Essentially, you borrow shares of the stock from a broker and sell it at the market price. If the stock declines in value — like you hope it does — you buy it back and return the shares to the brokerage, keeping the profit. While short-selling is absolutely legal in the United States, naked short-selling isn’t. Naked short-selling happens when a stock broker borrows shares without verifying that those shares actually exist or legally belong to the entity they’re borrowed from. It’s also illegal to borrow a stock to be shorted and then not deliver those shares when it’s time to buy back. *How to short sell stocks* Traditionally, you’d have to call up your full-service broker and tell them you want to short a particular stock. But modern online brokerage accounts have made it easy to short a stock by simply selecting it as an order type. You’ll have to find a broker or brokerage account that offers short selling as an order type, because not all of them do. Webull and TD Ameritrade are two examples of brokerages that allow short-selling. Next, you’ll choose a market or limit order and the number of shares. Shares sold short are held under a contractual lending agreement, which may require a stock loan fee. The brokerage could also require you to have a margin account or cash collateral equal to an additional percentage of the stock price. This will protect you if the trade goes against you. Once this has been executed, you’ll need to keep a watchful eye on the stock price to buy it back at the right moment. This will help you act quickly if something goes wrong. *Benefits and risks of short selling* Waiting too long to buy back the shares could be disastrous. If the price of the stock has indeed dropped, you’ll buy back the shares, return them and keep the profit. But if the price of the stock rose, you’ll lose money. *3 alternatives to short selling* Short selling can be an extremely risky endeavor. There are less-risky ways to take an inverse position to certain stocks or sectors. Here are three ways you can take a contrary position to the market without short-selling. 1. Inverse exchange-traded funds or ETFs. 2. Put options. 3. Call options. Want to learn more about these short-selling alternatives? Let us know in the comments, and we might just make a video. Ultimately, short-selling can be profitable, but it’s also very risky. Taking the time to educate yourself about a stock is essential and can protect you from losses. You can learn more with our guide to short selling — linked in the description box below. If you liked this video, don’t forget to hit the subscribe button so you’ll be the first to know when new Finder videos drop. #shortselling #howshortsellingworks #shortstocks #finder #shortsellingexplained