Can you short sell stocks that are traded below $5? My broker says I can’t.

Answer:

Short selling can be very risky for the investor and the broker. Brokers often tell investors that only stocks above $5 can be sold short. Although this may be true for your particular brokerage firm it is not a requirement established financial institutions (finra) or the securities Commission of the securities and exchange Commission (sec).

Most brokerage firms will have a “short list”, detailing all the firm’s securities allows investors to sell without any additional requirements. If You do not want a short sale of securities that is not specified in this list, Your broker will have to check with the Department securities lending, to see if brokers specific enough security for you to short sell. The list of securities available for short sale will vary depending on different brokerage companies, and it is entirely up to your broker to decide whether it will help you in short sales of securities.

For more on short sale, take a look at our short Selling Tutorial.

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