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How to short sell shares in a registered account?

26 February 2024 by National Bank Direct Brokerage
A picture of a woman who is happy that she integrated short selling in her self-directed investment strategy.

One of the first rules that investors learn early on is to buy low and sell high. Investors will search for and buy securities that they believe will increase in value and will avoid those that they believe will decrease in value. When holding assets in a margin account, an investor can use a short selling strategy to try to make money as a security goes down in value instead of simply avoiding those securities.

How to short sell shares in a registered account? | NBDB
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For many investors, most of their investments will be held in registered accounts or a TFSA where short selling isn’t permitted. However, they can take advantage of declining shares prices by using inverse ETFs and put options.

Key Takeaways

  • Short selling is a way of making money by selling borrowed stock at a higher price, then buying it back at a lower price, before returning the stock to the owner.
  • Short selling requires access to a margin account and lets investors take advantage of falling share prices.
  • When speculating on falling share prices, registered account holders can take advantage of inverse ETFs and buying put options.
  • Buying and trading put options allows the option buyer to profit as the underlying asset gets closer to the strike price and the value of the option premium goes up.
  • If the underlying asset stays above or never reaches the strike price by the expiration date, the put option buyer's loss is limited to the initial premium paid and any commissions, if applicable.

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How to short sell shares in a registered account? | NBDB
National Bank Direct Brokerage logo

Finance is a funny

language.

 

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you understand it.