Lesson

Borrow & locate steps | Options Educator

Preview locate requests, borrow fees, and squeezes before shorting.

In this lesson

What is Short Selling?

• Short selling profits when stocks fall
• Must borrow shares before selling short
• Hard-to-borrow stocks have higher fees
• Losses are theoretically unlimited

The Locate Process

• Locates confirm share availability
• ETB stocks need no special locate
• HTB stocks have high fees that can exceed profits
• Locates are often valid for one day only

Short Squeeze Dynamics

• Squeezes happen when shorts are forced to cover
• High short interest + catalyst = squeeze risk
• Squeezes can cause 10x+ price increases
• Use options for defined risk when bearish

Short Selling with Options

• Put options = bearish bet with defined risk
• No borrow needed for option-based bearish trades
• Spreads reduce cost but cap profit
• Options eliminate short squeeze risk

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