Summary: For investors expecting a decline in the price of Apple stock, shorting can be a valid trading strategy. This guide will show you how to short Apple stock using a reputable online brokerage like eToro.
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About Apple
The company was founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne in Silicon Valley, California. It has built a legacy for seamlessly integrating and streamlining hardware, software, and services, forging a name for itself and earning customer loyalty and substantial market share.
Apple’s portfolio includes products such as iPhone, iPad, Mac computers, and Apple WatchCloud and services like iCloud, iTunes, Apple TV+, and Apple Music. It remains one of the Big Five tech companies, alongside Alphabet, Amazon, Microsoft, and Meta.
Apple is a component of the Nasdaq-100, DJIA, S&P 100, and S&P 500 indices. It trades on the Nasdaq under the AAPL ticker.
What is short selling?
However, the expected drop in price is never guaranteed, so short selling bears a higher risk than conventional stock trading.
Traditional shorting
In traditional shorting, you borrow and sell shares from the brokerage on the open market. If the price falls as expected, you can repurchase the shares, return them to the broker, and pocket the difference.
However, suppose, for example, Apple stock price rises counter to the investor’s stock shorting assumption. In that case, they face potentially substantial losses, as they must repurchase the shares at a much greater cost to close their position.
What are financial derivates?
Alternatively, investors can short Apple stock via derivatives like options, swap contracts, and futures contracts.
- Options are assets that give you the right, but not the obligation, to buy or sell a stock at a predetermined price within the given timeline.
- Swap contracts involve exchanging pre-agreed cash flows or liabilities between two parties over a set period. They are often used to hedge against interest rate or currency fluctuations.
- Futures contracts obligate the investors to buy or sell Apple stock at a predetermined price on a future date, allowing them to profit from any price movements. As with all derivatives, the investor does not actually own the underlying asset.
How to short Apple stock: step-by-step
Investors willing to short Apple stock can follow our step-by-step guide and be done within minutes in a simple process:
Step 1: Choose a broker
Investors have to access a platform that provides short-selling services in order to short Apple stock. Our recommended choice is eToro, a reputable online trading service known for its user-friendly interface and a plentitude of financial instruments, such as options and CFDs (not available in the U.S.):
- Commission-free stock and ETF trading;
- 2,000+ stocks from 17 exchanges;
- Fractional shares available;
- Charting tools;
- User-friendly platform.
Disclaimer: 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. This content is not intended for US users. eToro USA LLC does not offer CFDs, only real Crypto assets, Stocks and ETFs are available.
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eToro USA is registered with FINRA for securities trading.
For additional short-selling opportunities of blue-chip stocks, consider the following guides:
- How to Short Tesla Stock;
- How to Short Amazon Stock;
- How to Short Meta Stock;
- How to Short Microsoft Stock;
- How to Short Nvidia Stock;
- How to Short Alphabet Stock.
Step 2: Open and fund your account
Once you opt for a brokerage, you need to create and verify your account. The platform will email you the proper instructions.
Afterward, you should transfer funds into your new account to prepare and cover the margin for short-selling Apple stock. Typically used funding methods include bank transfers, debit or credit cards, and transaction services like PayPal.
Step 3: Decide on your budget
Denoting the limit of your budget will protect you from a potential financial disaster associated with the high risk of short-selling stock. Additionally, make sure you have done the following:
- Paid off all high-interest debt, such as credit cards and personal loans;
- Created an emergency fund that covers at least three months of daily life expenses.
Step 4: Open a short position on Apple stock
Next, you should open a position and conduct Apple stock shorting:
- Step 1: Log into your account and find Apple’s ticker symbol AAPL, then click on Trade;
- Step 2: Decide on the option’s expiry date and price the number of shares you want to purchase;
- Step 3: Review the pricing, risk, and other relevant metrics;
- Step 4: Decide how many 100-share contracts you want to purchase;
- Step 5: Confirm the position.
Step 4: Manage your option
Once you have confirmed the position, you can hold until the expiration date to potentially profit if the stock price moves in the expected direction. If the market goes against your estimation, your option may close at a partial loss or become worthless.
If you prefer not to wait until expiry, you can sell your option on the market. Go to your ticket, choose an order type (market, limit, or trigger), set your conditions, and wait for the buyer.
Apple stock price today
Pros and cons of shorting Apple stock
Pros
- Profit potential: If Apple stock price declines over the designated period, shorting investors can earn significant profit;
- Hedge against long positions: Shorting Apple can diversify a portfolio by providing a hedge against losses in other holdings, especially long positions;
- Profit from overvalued stocks: Short selling allows you to capitalize on overvalued stocks and benefit from sector or market downturns.
Cons
- Potential free-fall losses: Unlike buying Apple stock, where the price cannot go below zero, short-selling Apple stock has unlimited downside risk, as there is no limit on how high the stock price can rise, especially during a short squeeze scenario;
- Borrowing fees: Short-selling stock comes with borrowing fees, as you do not own the asset, and these additional costs can eat into profits or further increase losses;
- Dividend costs: Short sellers are required to compensate for the dividend payments to the shareholders they borrowed from, as Apple is a dividend stock. This can increase the overall cost of the short position.
Common mistakes to avoid when shorting Apple stock
Make sure to avoid these common investing mistakes when dealing with short-selling:
- Lack of research: Detailed research of Apple stock price trends, as well as the general prospects of shorting stocks, is necessary before you open a short position due to the high level of risk involved;
- Lack of stop-loss order: Stop-loss order is vital in cutting the position short and preventing free-fall losses;
- Underestimating the market: Price volatility and short squeeze scenarios must be accounted for;
- Staking everything on one asset: Always diversify your portfolio;
- Overleveraging: Borrowing above your financial potential or trading on excessive margin can be hazardous.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about how to short Apple stock
Can I short Apple stock without owning the shares?
Yes, you can. Investors do not need to own Apple shares since they can borrow them from the brokerage.
Can I short Apple stock without a margin account?
Investors typically need a margin account to short a stock. eToro offers limited margin accounts, which allows you to short Apple stock.
Is short selling legal?
Short selling is legal in most financial markets. However, it is vital to understand the rules and regulations governing short selling with your local authorities.
How much does it cost to short Apple stock?
The fees involved in shorting Apple stock include borrowing fees, interest on margin, and any outstanding commission fees charged by the brokerage.
What happens if I cannot cover my short position?
If you find yourself unable to cover your short position, the brokerage may liquidate your position to mitigate potential losses.
Highly Rated Stock Trading & Investing Platform
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
-
0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
-
Copy top-performing traders in real time, automatically.
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eToro USA is registered with FINRA for securities trading.
