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Duration: 6:27

Instructor:

Contributor: Interactive Brokers

Level: Advanced

Selling stocks short can be a straight-forward process on IBKR’s award-winning Trader Workstation platform (TWS). In this lesson you will learn how to find the number of shares available to short held at IB and the fee rate associated with selling short any stock.

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Study Notes:

Selling stocks short can be a straight-forward process on IB’s award-winning Trader Workstation
platform (TWS). In this Short Video you will learn how to find the number of shares available to short
held at IB and the fee rate associated with selling short any stock.

Investors typically hold long positions. IB accounts cannot simultaneously hold a long and short position
in the same security, also called “shorting against the box”. And so there is no order type to buy long
and sell short – there is only buy or sell. If you sell more stock than you own in your IB account you will
create a short position.

Adding shortable information to your display is simple.

TWS users can customize their watchlist or portfolio layout to display several fields related to short
selling. Click the wrench icon to configure and select Settings. From the Configuration window, look to
the right under Available Columns and click on the “+” sign next to the Short Selling group.

Here you will see several relevant titles – note that if you hover on the question mark symbol to the
right you will see a pop-up description defining the information. For example, the Fee Rate description
describes the annualized interest rate on borrowed shares, which is charged daily. Short sellers also
receive short sale proceeds interest on the collateral value of borrowed shares. For a more detailed
explanation of shorting costs at IB, please visit the Interest and Financing page on the IB website.
The Shortable Shares column shows the number of shares currently available for shorting at IB. You can
add individual columns by highlighting the label and then clicking on the Add button in the center of the
page. Highlight the entire group to add all.

The Utilization column can most easily be understood as a ratio of demand to supply in the securities
lending market. For example, Apple Inc. ticker (AAPL) may have utilization of less than 1% because the
stock has a high market capitalization and vast shorting availability relative to the demand to borrow
shares for shorting. Snap Inc. ticker (SNAP) may have utilization above 90% because of its lower market
capitalization and higher demand to short as compared to the number of available shares.
Utilization is defined as loaned shares divided by loanable shares in the securities lending market. The
Utilization metric on TWS is not specific to IB. It is based on street-wide data provided by a securities
finance data vendor. The metric is only an indication, as not every lender reports their Utilization to the
data vendor.

Once added to your page display, each value should populate for displayed ticker symbols. Users can
also view the pop-up description by hovering above the respective column header. If you have added all
columns from the Short Selling group to your display you should be able to judge not only the indicative
borrowing cost to sell the stock short, but also how short the market is with respect to the number of
shares in circulation and how many days it might take for all shorts to cover their positions.

In the Order Entry Panel users can see a Shortable button. In most cases the button is displayed in light
green indicating IB has located stock available to short. A dark green dot lets the user know this stock is
shortable, but IB does not have sufficient locates to enable shorting. You may contact customer service
with a locate request if there is a dark green dot. A red dot indicates the stock is not shortable at IB.
Hover over the button to see a pop-up explanation showing fee rate and number of shares available to
sell short.

Click on the hyperlink to open the Stock Loan Borrow rates window. Note this is also available from the
New Window button in the top left corner of Mosaic. The SLB rates window shows time of intraday
changes to fee and rebate rates, borrow availability and a one-month plot to show fee rate variability
over time. You may move the timeline scroll bar back up to 3 years to see historical fee rates.
If you are selling a stock short, you need not contact IB in advance. Simply enter an order to sell. If IB has
locates available, your order will be submitted and should execute.

An order to sell short where IB does not currently have sufficient locates will generate an alert to the
stock loan borrow department. Upon transmitting the order, if IB’s SLB department does not have a
locate, you will receive message alerting you to this, and the order to sell short is held until shares can
be located. If shares can be located, the order will be submitted for execution. If no locate can be found
the order will be held until it expires and will not execute.

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Supporting documentation for any claims and statistical information will be provided upon request.

Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Order Types / TWS

The order types available through Interactive Brokers LLC’s Trader Workstation are designed to help you limit your loss and/or lock in a profit. Market conditions and other factors may affect execution. In general, orders guarantee a fill or guarantee a price, but not both. In extreme market conditions, an order may either be executed at a different price than anticipated or may not be filled in the marketplace.

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