Is it easier for brokers to find shares to short in premarket?
"The shares available to short are a portion of those shares held by the longs. This number is actually much easier to determine outside of active trading hours, but either way doesn't really impact the matter at hand since computers are pretty good at counting things. If your broker is putting up obstacles to your issuing sell short limit orders in the pre-market then there is likely some other reason (maybe they reserve that function to ""premium"" account holders?)" I don't think that the trading volume would impact a broker's ability to find shares to short.  You might think that a lot more people are trying to short a stock during regular trading hours than in the pre-market, and that's probably true.  But what's also true is that a lot more people are covering their shorts during regular trading hours than in the pre-market.  For stocks that have difficulty in finding shares to short, any time someone covers a short is an opportunity for you to enter a short. If you want to short a stock and your broker is rejecting your order because they can't find shares to short, then I would recommend that you continue placing that order throughout the day.  You might get lucky and submit one of those orders right after someone else has covered their short and before anyone else can enter a short.  I have had success doing this in the past.
Adding to the answers above, there is another source of risk: if one of the companies you are short receives a bid to be purchased by another company, the price will most probably rocket... Stating poor estimates in advance will lower your share price to compensate for thge extras boost it gets later ... And may run afoul of stock manipulation laws. More pain than gain likely. A bit of poking around brought me to this thread on the Motley Fool, asking the same basic question: I think the problem is the stock price. For a stock to be sold short, it has to be marginable which means it has to trade over $ 5.00. The broker, therefore, can't borrow the stock for you to sell short because it isn't held in their clients' margin accounts. My guess is that Etrade, along with other brokers, simply exclude these stocks for short selling. Ivestopedia has an explanation of non-marginable securities. Specific to stocks under $5: Other securities, such as stocks with share prices under $5 or with extremely high betas, may be excluded at the discretion of the broker itself. That's up to you. If you instruct your broker to sell shares purchased in specific lots, they can do that -- but doing so requires that you and/or they track specific fractional lots forever afterwards so you know what is still there to be sold. FIFO simplifies the bookkeeping. And I am not convinced selecting specific lots makes much difference; the government gets its share of your profits sooner or later. I think George's answer explains fairly well why the brokerages don't allow this - it's not an exchange rule, it's just that the brokerage has to have the shares to lend, and normally those shares come from people's margin, which is impossible on a non-marginable stock. To address the question of what the alternatives are, on popular stocks like SIRI, a deep In-The-Money put is a fairly accurate emulation of an actual short interest.  If you look at the options on SIRI you will see that a $3 (or higher) put has a delta of -$1, which is the same delta as an actual short share. You also don't have to worry about problems like margin calls when buying options.  The only thing you have to worry about is the expiration date, which isn't generally a major issue if you're buying in-the-money options... unless you're very wrong about the direction of the stock, in which case you could lose everything, but that's always a risk with penny stocks no matter how you trade them. At least with a put option, the maximum amount you can lose is whatever you spent on the contract.  With a short sale, a bull rush on the stock could potentially wipe out your entire margin.  That's why, when betting on downward motion in a microcap or penny stock, I actually prefer to use options.  Just be aware that option contracts can generally only move in increments of $0.05, and that your brokerage will probably impose a bid-ask spread of up to $0.10, so the share price has to move down at least 10 cents (or 10% on a roughly $1 stock like SIRI) for you to just break even; definitely don't attempt to use this as a day-trading tool and go for longer expirations if you can. The stock tends to drop by the amount of the dividend -- or if you prefer to think of it this way, the stock price has been pushed up by the amount of the dividend before it was paid out. Really, all this shift does is factor out the impending dividend's effect on the real purchase cost of the stock. As such it's pretty much irrelevant except that, of course, the dividend is short-term gain that you have to pay taxes on almost immediately. Which also tends to get figured into the price folks are willing to pay for the stock. Conclusion: no, there's no real opportunity here. There's a slight tax reason to avoid buying right before dividends are paid, but that's about it. Basic principle: If it's simple and obvious,the market has already accounted for it. A broker will only get so many shares for any IPO. They will give their highest profit customers priority, but try to keep the smaller ones happy as well. So where my TWTR order today was for 1000 shares, I actually was granted 100.  In the dotcon* bubble of the late 90's, there were some stocks I saw as many as 1000 hit my account.  (*not a typo, this is the title of a book on that period, the making of a bubble and irrational doings on Wall Street. No, but insider information would have tipped them off on the timings of when to time some of their actions... possibly planning shorting it ahead, all kinds of who-diggery that those financial wizards can do to make shit tons of money off stocks / companies losing money. Reuters has a service you can subscribe to that will give you lots of Financial information that is not readily available in common feeds.  One of the things you can find is the listing/delist dates of stocks.  There are tools to build custom reports.  That would be a report you could write.  You can probably get the data for free through their rss feeds and on their website, but the custom reports is a paid feature. FWIW re-listing(listings that have been delisted but return to a status that they can be listed again) is pretty rare.  And I can not think of too many(any actually) penny stocks that have grown to be listed on a major exchange. This is a gross simplification as there are a few different ways to do this. The principle overall is the same though. To short a stock, you borrow X shares from a third party and sell them at the current price. You now owe the lender X shares but have the proceeds from the sale. If the share price falls you can buy back those shares at the new lower price, return them to the lender and pocket the difference. The risk comes when the share price goes the other way, you now owe the lender the new value of the shares, so have to find some way to cover the difference. This happened a while back when Porsche made a fortune buying shares in Volkswagen from short sellers, and the price unexpectedly rose. "It is true, as farnsy noted, that you generally do not know when stock that you're holding has been loaned by your broker to someone for a short sale, that you generally consent to that when you sign up somewhere in the small print, and that the person who borrows has to make repay and dividends. The broker is on the hook to make sure that your stock is available for you to sell when you want, so there's limited risk there. There are some risks to having your stock loaned though.  The main one is that you don't actually get the dividend.  Formally, you get a ""Substitute Payment in Lieu of Dividends.""  The payment in lieu will be taxed differently.  Whereas qualified dividends get reported on Form 1099-DIV and get special tax treatment, substitute payments get reported on Form 1099-MISC. (Box 8 is just for this purpose.)  Substitute payments get taxed as regular income, not at the preferred rate for dividends. The broker may or may not give you additional money beyond the dividend to compensate you for the extra tax. Whether or not this tax difference matters, depends on how much you're getting in dividends, your tax bracket, and to some extent your general perspective. If you want to vote your shares and exercise your ownership rights, then there are also some risks.  The company only issues ballots for the number of shares issued by them.  On the broker's books, however, the short sale may result in more long positions than there are total shares of stock. Financially the ""extra"" longs are offset by shorts, but for voting this does not balance. (I'm unclear how this is resolved - I've read that the the brokers essentially depend on shareholder apathy, but I'd guess there's more to it than that.) If you want to prevent your broker from loaning out your shares, you have some options:" You must understand that: So, if you -- the prospective buyer -- are in Waukegan, do you take the train all the way to New York City just to buy 100 shares of stock?  No.  That would be absurdly expensive.  So, you hire an agent in NYC who will broker a deal for you in the exchange. Fast forward 100 years, to the time when instant communications is available.  Why do we now still need brokerages, when the Exchanges could set up web sites and let you do the trading? The answer is that the Exchanges don't want to have to develop the accounting systems to manage the transactions of hundreds of thousands of small traders, when existing brokerage firms already have those computerized processes in place and are opening their own web sites. Thus, in 2017 we have brokerage firms because of history. Timothy Sykes specializes in this type of trade, according to his website. He has some recommendations for brokers that allow shorting low-priced stocks: "If you can't find anyone to lend you the shares, then you can't short. You can attempt to raise the interest rate at which you will borrow at, in order to entice others to lend you their shares. In practice, broadcasting this information is pretty convoluted. If there aren't any stocks for you to buy back, then you have to buy back at a higher price. As in, place a limit buy order higher and higher until someone decides to sell to you. This affects your profit. Regarding the public ledger: This functions different in different markets. United States stock markets have an evolving body of regulations to alleviate the exact concerns you detailed, but Canada's or Dubai's stock markets would have different provisions. You make the assumption that it is an efficient process, but it is not and it is indeed ripe for abuse. In US stocks, the public ledger has a 3 business day delay between showing change of ownership. Many times brokers and clearing firms and other market participants allow a customer to go short with fake shares, with the idea that they will find real shares within the 3 business day time period to cover the position. During the time period that there is no real shares hitting the market, this is called a ""naked short"". The only legal system that attempts to deter this practice is the ""fail to deliver"" (FTD) list. If someone fails to deliver, that means there is a short position active with fake shares for which no real shares have been borrowed against. Too many FTD's allow for a short selling restriction to be placed, meaning nobody else can be short, and existing short sellers may be forced to cover." I am relative newbie in the financial market trading and as I understand it, the response from Victor is accurate in respect of trading CFD contracts. However, there is also the option to 'trade' through a financial spread betting platform which as its name suggests is purely a bet based upon the price of the underlying stock/asset. As such, I believe that your theory to short a stock just prior to its ex-dividend date may be worth investigating further... Apart from that, it's worthwhile mentioning that financial spread betting is officially recognised by HMRC as gambling and therefore not currently [2015/16] subject to capital gains tax. This info is given in good faith and must not be relied upon when making any investment and/or trading decision(s). I hope this helps you make a fortune - if it does; then please remember me!