Learn more about short-selling
When you want to short a stock, you place a completely normal sale order, but you choose a stock that you do not already have in your custody.
Nordnet lends the share to you completely automatically. When you want to close your position, you simply place a buy order on the same stock.
Short trading can be used to reduce market risk. If you have a long-term equity portfolio, short trading can be a good alternative to selling out of the stock when the stock market is turbulent.
You have a stock portfolio with 7 different stocks and you want to reduce your risk in the market. The stocks you have in your portfolio, you think, have long-term potential and therefore you choose to keep them. Instead, you short out 3 stocks that you experience as overvalued and that you think will fall in value.
If the stock market subsequently falls further, you will make money on the shares you have sold short, thus reducing your losses. This reduces the total market risk in your portfolio.
If you want to reduce your risk in the market further, you can, for example, choose to sell two of your shares and sell another 5 shares short. If you have 5 shares in the depository and go short in 5 other shares, you can say that you are market neutral.
Shorting stocks is an opportunity to make money in a falling market or by falling prices in individual stocks. Shorting means that you as a customer sell shares that you do not own.
When you sell shares that you do not own, Nordnet automatically takes out a securities loan for you to be able to deliver the shares to the buyer. Once you have shorted shares, you will make money when the price of the stock falls and lose money when the price of the stock rises. Exactly the opposite of an ordinary stock purchase.
When you later choose to buy back the shares that you have shorted, Nordnet will automatically return the shares to the lender. However, in the case of short trading, where you sell and buy back the shares on the same day, no securities loan will be taken out.
You pay an administration fee for securities loans, and you pay interest during the period you are shorted in a share. The brokerage when you sell shares in short trading is the same brokerage as in ordinary stock trading.
Note that dividends paid during the loan period accrue to the lender. The same applies to. subscription rights etc.
If you short a share on the same day as the dividend is paid, you have a duty to repay the dividend to the original owner of the share. Dividend is paid to the person who owns the share at 00.00 on the day of the general meeting. This should be taken into account before you consider being short in a stock over the day of the general meeting.
Click on the links below to see when general meetings are held in the markets where you can short shares:
Sweden (general meeting = annual general meeting or general meeting)
You borrow 50 pcs. CARL B the day before the general meeting, sell them short and leave the position short after the stock exchange closes. The new owner, who is the holder of the share on the day of the general meeting, is entitled to the dividend of e.g. DKK 6 per shares. This is paid directly to the new owner from the limited company.
At the same time, however, you have still borrowed the share, and therefore the original owner is also entitled to have the dividend paid out by you. In this case 50 pcs. dividend for CARL B of DKK 6 per share = DKK 300. The amount Nordnet will deduct from your account and ensure that it is transferred to the original owner.
More information can be found in the General Terms and Conditions for Securities Loans (pdf) under point 9.
Yes. In short trading, you speculate in price declines, and your potential profit becomes greater the closer the share price approaches zero. However, should the price rise instead, there is in principle no limit to how much the share can be worth, and thus also not to how large your loss can be. It is therefore very important to actively monitor the market in short trading.
There is also a risk that securities loans may not be taken out or that the lender will demand its shares back. In that case, the shares must be repurchased. In the event of a dividend payment, it will be you who must pay the dividend to the lender of the shares if you have a short position in the share.
Normally, when dividends are paid, a share will, all other things being equal, fall by the value of the dividend, but it is often speculated that the share does not fall as much as the size of the dividend. It can therefore be extra risky to be shorted in a share when dividends are to be paid.
As you sell shares that you do not own through short trading, Nordnet borrows the shares in the market at your expense. This happens completely automatically and you will see the securities loan in your custody the day after your short trade. You pay a fixed fee for the securities loan, for which you must pay interest during the period in which you are shorted in the share.
NOTE: You only have to pay interest and administration fee for the securities loan after the short trade has been completed if the repurchase is not completed on the same day as you have shorted. In other words, you do not have to pay for the securities loan if you short and buy the share on the same day.
When you short, you complete a sale in the same way as if you owned the stock. All you have to do is sell a share that you do not have in your custody account, and you repurchase the share exactly as in a normal purchase transaction.
A thought up example:
You do not own any shares in Vestas, but you believe that the share will fall in value. To complete a short trade, you therefore choose to sell 1000 shares at a price of 255, a total value of DKK 255,000.
After the sale, you will see an inventory of -1000 pieces in your deposit overview. Vestas shares. The day after your short trade, you will see an entry in your deposit on the securities loan and you will automatically be charged a fixed fee for the securities loan. The week after your sale, the price has dropped to 234, and you therefore choose to claim your winnings.
You now buy 1000 pcs. Vestas shares in the market as a normal purchase order, and you thereby close your shorted position in Vestas. Nordnet then automatically returns your borrowed shares to the lender, and you will then be charged the interest on the securities loan for the period you have borrowed the shares. Your gain can thus be calculated at 255,000 – 234,000 = DKK 21,000.
minus afdrag for kurtage, afgift for værdipapirlån og rente.
Yes, in the case of short trading, security must be provided. At Nordnet, a margin requirement of 15-100% or a negative collateral value corresponding to 115-200% of the market value is required. If you with a cash balance of e.g. DKK 50,000 will short a share with a margin requirement of 20%, you will be able to short / sell shares to a value of DKK 250,000.
However, in order not to have to close the position at an unfavorable price, it is recommended to have good margins in short trading
When you place a sell order to short, the trading system checks that there is sufficient security in your deposit in the form of cash and / or collateral value. The collateral requirement is 115 – 200% of the market value of the shorted share. This means that the amount in “Available for Trading” will decrease by an amount equal to 15 – 100% of the market value of the shorted share.
When repurchasing a shorted position, this purchase order is treated exactly like a regular purchase, thus charging the amount in “Available for Trade”. This means that if you have gone short but want to be in a positive position in the same stock, you must first buy a number of shares that corresponds to the number you are short in before a new purchase order can be placed to buy more equities. However, this only applies if the depot does not have coverage for both security requirements and purchase orders.
Short trading via the internet is limited to a market value of a maximum of DKK 10 million for the shorted positions.
According to a judgment in the National Tax Court, gains and losses from short trading in shares must not be taxed in the same way as gains and losses from ordinary share trading. The Capital Gains Tax Act is based on the fact that profits are found on the acquisition and subsequent sale of shares.
The National Tax Court therefore considers that a gain that is linked to a period in which the taxpayer has not been the owner of the shares cannot be considered covered by the Capital Gains Tax Act.
Therefore, short trades are not covered by the Share Taxation Act, but instead gains and losses on share loan schemes, including short trades, are covered by the Income Taxation Act (Section 4 (f) of the State Tax Act).
In other words, short trades must be declared as income and the net gain on short trades is taxable, while losses are not deductible.