Yes, you can short stocks on Robinhood, but only in a margin account with a minimum balance

Robinhood allows short selling through a margin account, which is different from the standard cash account most new users start with. To short a stock on Robinhood, you need a margin account with at least $2,000 in account value, and you must be at least 18 years old. The platform will lend you shares to sell at the current price, betting that the price will fall so you can buy them back cheaper and return them to Robinhood.

Not every stock on Robinhood can be shorted. The platform maintains a list of shortable securities, and you can check whether a specific stock is available for shorting by searching for it in the app — if shorting is available, you will see a "short" option when you go to sell. Stocks that are hard to borrow, newly listed, or have low trading volume are often unavailable for shorting.

Shorting carries real financial risk. If a stock rises instead of falls, your losses are theoretically unlimited because there is no ceiling on how high a stock price can go. You also pay interest on the borrowed shares, which Robinhood charges daily and deducts from your account. This is different from buying a stock, where your maximum loss is the amount you invested.

Key Takeaways

  • You must have a margin account with at least $2,000 in it to short stocks on Robinhood; a regular cash account does not allow shorting.
  • Robinhood lends you shares to sell, and you pay daily interest on the borrowed amount until you buy the shares back and return them.
  • Not all stocks are shortable on Robinhood — the app shows you which ones are available when you search for a specific stock.
  • Your losses from a short sale can exceed your initial investment if the stock price rises, which is why shorting is riskier than buying.
  • Robinhood can force you to close a short position if your account falls below the maintenance requirement, which is typically 30% of the short position's value.

How to set up a margin account on Robinhood

When you first open a Robinhood account, you start with a cash account by default. To short stocks, you need to convert to a margin account or open a new one as a margin account. In the app, go to your Account menu, select Investing, and look for the option to upgrade to margin. Robinhood will ask you to confirm that you understand the risks of margin trading, including the possibility of losing more than you invested.

Once you upgrade, Robinhood will when ready grant you margin buying power — typically two times your account balance. This means if you have $2,000 in your account, you can borrow up to $2,000 more to trade with. However, shorting does not use your buying power in the same way. When you short a stock, Robinhood lends you the shares, and the cash from selling those shares sits in your account as a credit.

Robinhood charges a margin interest rate that varies based on how much you borrow and market conditions. As of 2024, rates typically range from around 5% to 12.5% annually, but you should check the current rate in the app before you short, because the interest compounds daily and reduces your profit. The interest is automatically deducted from your account balance.

The mechanics of shorting on Robinhood

When you short a stock on Robinhood, the process works in reverse from a normal buy. You tell Robinhood to short a specific number of shares at the current market price. Robinhood borrows those shares from its own inventory or from other brokers and sells them on your behalf. The cash from that sale goes into your account as a credit.

Your goal is to buy those same shares back at a lower price, return them to Robinhood, and keep the difference as profit. If you shorted 100 shares of a stock at $50 per share, you received $5,000 in credit. If the stock falls to $40 and you buy 100 shares back, you spend $4,000, and your profit is $1,000 before interest and fees. But if the stock rises to $60, you lose $1,000 on the trade itself, plus whatever interest accrued.

You can close a short position at any time by buying back the shares and returning them. In the app, go to your Positions tab, find the shorted stock, and tap to sell (which in a short position means to buy back and close). The transaction settles in the same way as a regular stock purchase.

Maintenance requirements and forced closures

Robinhood requires you to maintain a minimum account balance relative to the size of your short positions. This is called the maintenance requirement, and it is typically 30% of the total value of your short positions. If your account balance falls below this threshold — either because the stock price rose or because you lost money on other trades — Robinhood will issue a margin call.

A margin call means Robinhood is asking you to deposit more money into your account to bring your balance back above the maintenance level. You usually have a few business days to deposit funds. If you do not, Robinhood has the right to force-close your short positions by buying back the shares automatically, which locks in your losses at that moment. This can happen even if you believe the stock will continue to fall.

For example, if you shorted 100 shares at $50 and the stock rises to $70, your short position is now worth $7,000. If your maintenance requirement is 30%, you need $2,100 in your account to hold that position. If your account balance drops below $2,100 for any reason, you will receive a margin call. If you cannot deposit funds quickly, Robinhood will buy back the shares at $70, locking in your $2,000 loss.

Stocks that cannot be shorted on Robinhood

Robinhood maintains a list of shortable stocks, and this list changes regularly based on availability and market conditions. Stocks that are typically unavailable for shorting include penny stocks (stocks under $5), newly listed IPOs, stocks with very low trading volume, and stocks that are already heavily shorted. You can check whether a specific stock is shortable by searching for it in the app — if shorting is available, the short option will appear when you go to place a trade.

If you try to short a stock that is not on Robinhood's shortable list, the app will straightforward not show you the short option. You cannot force it. Some stocks move on and off the shortable list depending on how many shares are available to borrow. If you want to short a stock that is currently unavailable, you can check back later, but there is no way to reserve the ability to short it in advance.

Interest, fees, and the real cost of shorting

The main ongoing cost of shorting on Robinhood is the margin interest rate. This is charged daily on the cash credit from your short sale and is deducted automatically from your account. If you short $5,000 worth of stock and the margin rate is 8% annually, you pay roughly $1.10 per day in interest (8% divided by 365 days). Over a month, that is about $33. Over a year, it is about $400.

Robinhood does not charge a separate short-selling fee or borrow fee like some other brokers do. However, the interest rate is your main cost, and it works against you every day the position is open. This is why shorting is typically a shorter-term trade — the longer you hold a short position, the more interest eats into your potential profit.

If the stock you shorted pays a dividend, you are responsible for paying that dividend to the share lender. Robinhood will deduct the dividend amount from your account. This is another cost that reduces your profit or increases your loss.

Tax implications of short selling on Robinhood

When you close a short position, you have a capital gain or loss, just like with a regular stock purchase. If you shorted at $50 and bought back at $40, you have a $10 per share gain. If you shorted at $50 and bought back at $60, you have a $10 per share loss. These gains and losses are reported on your tax return.

The holding period for a short sale is measured from when you close the position, not from when you opened it. If you hold a short position for less than one year before closing it, any gain is taxed as a short-term capital gain, which is taxed at your ordinary income tax rate. If you hold it for more than one year, it is a long-term capital gain, which typically has a lower tax rate.

Robinhood will send you a Form 1099-B at the end of the year showing all your short sales and the proceeds. You will need this form to report your short-selling activity on your tax return. The interest you pay on margin is also deductible as an investment expense on Schedule A, though this deduction has limitations under current tax law.

Frequently Asked Questions

What is the minimum account balance to short on Robinhood?

You need at least $2,000 in your margin account to short stocks on Robinhood. This is a regulatory requirement set by the Financial Industry Regulatory Authority (FINRA), not a Robinhood-specific rule. The $2,000 must be in cash or settled securities in your account.

Can I short a stock on Robinhood if it is not on the shortable list?

No. If a stock does not appear as shortable in the Robinhood app, you cannot short it through that platform. You can check back later, as the shortable list changes based on share availability. If you need to short a stock that Robinhood does not offer, you would need to use a different broker.

What happens if the stock I shorted goes up and I run out of money?

Robinhood will issue a margin call if your account balance falls below the maintenance requirement (typically 30% of your short position's value). You have a few business days to deposit funds. If you do not, Robinhood will force-close your short position by buying back the shares, locking in your loss at that price.

Do I pay interest on a short sale every day?

Yes. Robinhood charges margin interest daily on the cash credit from your short sale. The rate varies but typically ranges from 5% to 12.5% annually. The interest is deducted automatically from your account balance and compounds daily, so the longer you hold the short, the more you pay.

How is a short sale taxed?

Your profit or loss from closing a short sale is a capital gain or loss. If you hold the short for less than one year, it is taxed as short-term capital gain (at your ordinary income rate). If you hold it for more than one year, it is long-term capital gain (usually taxed at a lower rate). Robinhood sends you a Form 1099-B showing your short sales at year-end.