Robinhood allows short selling, but only in margin accounts and only for stocks that meet specific requirements
You can short sell on Robinhood if you have a margin account with at least $2,000 in account value. A standard cash account does not permit short selling. When you short a stock on Robinhood, you are borrowing shares from a broker's inventory, selling them at the current price, and betting the price will fall so you can buy them back cheaper and return them.
Not every stock is available to short on Robinhood. The platform maintains a list of shortable securities that changes based on what shares are available to borrow. Penny stocks, very new IPOs, and stocks with low trading volume are often unavailable. You can check whether a specific stock is shortable by searching for it in the app — if the short option does not appear, that stock is not currently available to borrow through Robinhood.
Short selling on Robinhood carries costs and risks that do not explore to buying and holding. You pay interest on the borrowed shares, which varies depending on how hard the stock is to borrow. You also remain liable for any losses if the stock price rises instead of falls, and those losses are theoretically unlimited.
Key Takeaways
- You must have a margin account with at least $2,000 in account value to short sell on Robinhood; cash accounts cannot short.
- Robinhood maintains a list of shortable stocks that excludes penny stocks, very new IPOs, and low-volume securities.
- You pay interest on borrowed shares, and the rate depends on how difficult the stock is to borrow at that moment.
- Short selling losses are theoretically unlimited if the stock price rises, unlike buying where your maximum loss is what you invested.
How to set up a margin account on Robinhood
When you open a Robinhood account, it defaults to a cash account. To short sell, you must convert it to a margin account or open a new margin account. You can request the conversion in the app under Account settings. Robinhood will ask you to confirm that you understand the risks of margin trading, including the possibility of losing more than you deposit.
Once your account is approved for margin, Robinhood grants you a margin limit — the amount you can borrow to trade with. This limit is separate from your account balance. For example, if you have $5,000 in your account and a $5,000 margin limit, you can control up to $10,000 in trades. The margin limit depends on your account history and the stocks you trade, and Robinhood can lower it at any time.
Robinhood charges interest on any margin balance you carry overnight. The rate is not fixed and changes based on how much you borrow and market conditions. You can see your current margin interest rate in the app under Account settings.
Which stocks you can and cannot short on Robinhood
Robinhood publishes a list of shortable stocks in the app. To check if a stock is shortable, search for it and look for a short selling option in the order screen. If you do not see the option, that stock is not available to borrow. Stocks that are typically unavailable include penny stocks trading under $5, stocks listed on OTC markets, and very new IPOs in their first few weeks of trading.
The availability of a stock to short can change day to day. A stock might be shortable one week and unavailable the next if Robinhood runs out of shares to lend. Conversely, a stock that was unavailable might become shortable again once shares are returned by other traders. You cannot short options, mutual funds, or ETFs on Robinhood, only individual stocks.
How short selling works step by step on Robinhood
To short a stock, open the stock page and tap the order button. Select "Sell" as the order type, then choose "Short" from the dropdown menu. Enter the number of shares you want to short and the order type — market order, limit order, or stop order. Robinhood will borrow the shares on your behalf and when ready sell them at the market price you receive.
Once the short sale executes, you own a negative position in that stock. Your account shows you owe those shares to the broker. You pay interest daily on the borrowed shares, calculated based on the current borrow rate and the number of shares you hold short. The interest accrues in your account and is deducted when you close the position or at the end of each month.
To close a short position, you buy back the shares at whatever the current market price is. If you bought them back at a lower price than you sold them for, you keep the difference as profit (minus interest and any fees). If the price rose, you lose money. You can close the position at any time during market hours by placing a buy order for the same number of shares you shorted.
Interest rates and costs of shorting on Robinhood
Robinhood charges interest on borrowed shares, but the rate varies. Stocks that are straightforward to borrow carry lower rates, sometimes as low as 1 to 2 percent per year. Stocks that are hard to borrow — because few shares are available or many traders want to short them — carry much higher rates, sometimes 10 to 50 percent per year or more. Robinhood displays the current borrow rate for each stock before you place the short order.
Interest is calculated daily and charged to your account. If you hold a short position for one month, you pay roughly one-twelfth of the annual rate. For example, a stock with a 12 percent annual borrow rate costs about 1 percent per month. On a $5,000 short position, that is roughly $50 per month in interest alone.
Beyond interest, you may also pay Robinhood's standard trading fees if applicable, though Robinhood does not charge commission on stock trades. Some stocks incur a "locate fee" if shares are particularly hard to borrow, though Robinhood typically absorbs this cost for standard accounts.
Margin calls and forced buybacks on Robinhood
If your short position loses money and your account value falls below Robinhood's maintenance requirement, you will receive a margin call. Robinhood requires you to maintain a minimum account value relative to your margin balance — typically 30 percent of the value of your short positions. If your account drops below this level, Robinhood will notify you and give you a important date to deposit more cash or close positions.
If you do not meet the margin call by the important date, Robinhood can force-liquidate your short positions without your permission. This means Robinhood will automatically buy back your shares at whatever the market price is at that moment, locking in your losses. You cannot prevent this forced buyback — it is part of the margin account agreement you signed.
A margin call can happen quickly if the stock you shorted rises sharply. For example, if you short 100 shares at $50 and the stock jumps to $75, you have lost $2,500 on a position that may have started with much less capital. This is why short selling is considered high-risk.
Risks specific to short selling on Robinhood
The primary risk of short selling is that losses are theoretically unlimited. When you buy a stock, the worst that can happen is the company goes bankrupt and the stock goes to zero — your loss is capped at what you invested. When you short a stock, there is no upper limit to how high the price can go. A stock can double, triple, or rise tenfold, and you remain obligated to buy back the shares at whatever price they reach.
Short squeezes are another risk. If many traders short the same stock and the price begins to rise, short sellers panic and buy back shares to cut losses. This buying pressure drives the price even higher, forcing more short sellers to cover, which creates a self-reinforcing cycle. Robinhood may also recall borrowed shares at any time if the lender needs them back, forcing you to close your position when ready regardless of the current price.
Dividend payments and corporate actions also affect short positions. If a company pays a dividend while you hold a short position, you must pay that dividend to the share lender. Stock splits and mergers can complicate short positions as well. Additionally, short selling is taxed as short-term capital gains regardless of how long you hold the position, meaning you pay ordinary income tax rates rather than the lower long-term capital gains rates.
Frequently Asked Questions
Do I need $2,000 to open a margin account, or just to short sell?
You need $2,000 in your account to open a margin account on Robinhood. This is a regulatory requirement set by FINRA, not a Robinhood policy. Once the account is open, you can short sell as long as you maintain the $2,000 minimum and meet Robinhood's maintenance requirements for your specific positions.
What happens if a stock I shorted gets delisted?
If a stock is delisted from major exchanges, Robinhood will force you to close the position, usually at the last available price before delisting. You will be obligated to buy back the shares even if no market exists for them anymore. This is rare but possible with penny stocks and companies facing serious financial trouble.
Can I short sell on Robinhood if I live outside the United States?
Robinhood's short selling feature is available only to U.S. residents with U.S. bank accounts. International users cannot access margin accounts or short selling through Robinhood. Some international brokers offer short selling, but you would need to use a different platform.
How long can I hold a short position on Robinhood?
You can hold a short position indefinitely as long as you maintain your margin requirement and Robinhood has shares available to lend. However, Robinhood can recall borrowed shares at any time if the lender needs them back, forcing you to close the position. There is no stated time limit, but the longer you hold, the more interest you accumulate.
What is the difference between shorting and buying put options on Robinhood?
Shorting a stock means borrowing and selling the actual shares; put options give you the right to sell shares at a set price by a set date. Puts have a defined maximum loss (the premium you pay), while short selling has unlimited loss potential. Puts expire; short positions do not. Both are available on Robinhood, and both carry significant risk.