Selling Short

[trackers]

As a matter of interest, can anyone help me with how to sell stock short?

I know the theory behind it: agree to a predetermined price with which to sell your broker some shares, and hope that thatshare plummets so that it is cheap to buy etc etc.

But the question is:
1. Is this standard practice?
2. What discount price do the brokers get?
3. How do you do this with ASB securities online? lol.

Any help would be greatly appreciated :)

[Naylz]

I know that asb will not allow you to sell short. Are there any brokers that will?

[Neo-Con]

good question guys. Finance lecturers talk about selling short like it is an option we all have in the same way that we can all buy shares, but in fact I don't know anyone who does it and don't know how you can in NZ

[diesel]

Short selling should be entered into with care. Remember that if long stocks your risk is limited to your capital introduced into the stock. If you go short a stock your risk is unlimited as the stock may skyrocket upwards. I certainly would not want to short say gold or silver, you may wake up and find the Saudi royal family dispossed and gold at $3000 an ounce. I believe that e-trade canada and US allows shorting stocks if you want to proceed along that path.

[Base Trader]

I do not believe NZ financial institutions (FI) offer an ability to sell short shares as a standard product. This can be completed by an Over The Counter (OTC) transaction in theory by a financial institution that holds the shares you are looking to short or that is willing to front the short for you.

The principle is that a broker/FI that you deal with borrows shares from another FI or general holder of the shares and then sells these immediately upon an order to “short”. Upon close out the shares are bought back from the market. You pay/recieve a difference (less commission) and the other legs are also cancelled out with shares returned to the original lender.

There are tax implications to be addressed in the process as well as general collateral/credit issues also.

In well traded (deep and liquid) commodities and stocks there are general markets in leveraged trading (long or shorts) that can be accessed by the spread betters such as IG index, Spreadbetting, Cantorindex etc. Care needs to be taken that you can price the transaction – otherwise you may get screwed in commission.

[George]

You could always send some funds to an Aussie broker and trade put warrants or options.
I use AOT (now Commsec) and warrants cost the same as shares ie. $30 per trade. I remember NAB before the trading scandal with one put warrant at 3c that went to 17c in a few days. $300 to $1700, however, you must be prepared to lose the whole premium on products that are so far out of the money.

[Drone]

Certainly most discount brokers in NZ do not offer this service, I would guess the reason for this is mainly due to our relatively thin market (they don't have reliable depth of client holdings in enough stocks to make it a viable service). Full service brokers could prob do it, but you would need to make a biggish order and be a "good" client I would say.