Summary: Shorting is a solid strategy in bearish markets, allowing investors with a higher risk tolerance to be more speculative and potentially profit from short-term stock price fluctuations. In this guide, you will learn how to short Microsoft stock on an investment platform such as eToro.
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About Microsoft
Microsoft (NASDAQ: MSFT) is a global powerhouse in the technology sector, renowned for its software offerings such as the Windows operating systems, cloud computing solutions via Azure, and its widely embraced Xbox gaming consoles.
What is short selling?
Short selling, or simply shorting, is a trading strategy where you sell a stock you do not own, trying to predict its price drop. To execute a short sale, you actually borrow the stock from the broker and sell it, and if your projections come true and the price decreases, you repurchase the stock at the lower price and return it to the lender, keeping the price difference for yourself.
Short selling typically necessitates a designated margin account as well as certain margin prerequisites. For instance, if a broker mandates a 50% initial margin for shorted stocks, you would need $5,000 in your account to initiate a $10,000 short position.
Generally considered a bearish investment strategy, short selling is employed by traders foreseeing substantial downward movements in the value of stocks, commodities, or other financial instruments.
Types of shorting
Traditionally, shorting involves borrowing shares from a broker, selling them on the open market, and then repurchasing them at a lower price if the stock price goes down as anticipated. Alternatively, however, investors can engage in short selling through derivatives such as:
- Options: These grant investors the right (but not the obligation) to buy or sell a stock at a predetermined price within a specified timeframe;
- Futures contracts: These obligate the buyer to purchase or sell the stock at a predetermined price on a future date, enabling them to make a profit from price oscillations without ownership of the underlying asset.
How to short Microsoft stock?
These are the steps to short MSFT stock via options contracts:
- Step 1: Select an appropriate broker. Open a margin account with a brokerage platform that supports short-selling services, such as eToro. Keep in mind that US residents can only use options contracts to short, as CFDs are not available in the US;
- Step 2: Fund your account. Once your account is verified, deposit funds to meet the margin requirements necessary for short-selling the stock. Margin requirements vary among brokers, so ensure you have adequate funds to support your short position;
- Step 3: Initiate a short position. Initiate a short position by accessing the Amazon stock page on your chosen platform and selecting the Trade option. From there, set the expiration date and strike price for your option. Assess the pricing, risk factors, and relevant metrics provided on the selection page. Finally, determine the quantity of 100-share contracts you intend to purchase.
- Step 4: Manage your position. You can manage the position by holding the option until its expiration, potentially realizing profits if the stock behaves as anticipated. Alternatively, if the market deviates from your projections, the option may see partial loss or expire. If you choose not to wait until expiration, you can sell your option on the market. Simply navigate to your trading ticket, choose an order type (market, limit, or trigger), and wait for the buyer.
Disclaimer: 51% 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.
Where to short Microsft stock?
Our go-to platform for short-selling Microsoft stock is eToro, a major brokerage with millions of active users and offerings such as:
- Commission-free stock trading;
- Access to over 2,000 stocks from 17 different exchanges;
- Option to purchase fractional shares;
- Charting tools;
- User-friendly platform simplifying the trading experience.
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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Why short Microsft stock?
While long-term investors rely on fundamental and technical analysis to evaluate a company’s financial health and future prospects, short sellers tend to concentrate on short-term price fluctuations, aiming to capitalize on rapid movements in stock prices. Consequently, shorting Microsoft stock can be a viable strategy for seasoned short-term investors with a higher risk tolerance.
Shorting can also function as a hedge. In a typical short hedge, investors buy a put option in conjunction with a long-term stock investment. This put option acts as protection, enabling the investor to sell shares at a predetermined price in the event of a stock price decrease.
– How to short Apple stock;
– How to short Tesla stock;
– How to short Meta stock;
– How to short Amazon stock;
– How to short Nvidia stock;
– How to short Alphabet stock;
Microsoft stock price today
Pros and cons of shorting Microsoft stock
Pros
- Profit in bearish markets: By shorting, you can make a profit even if the stock price goes down;
- Diversification: Short selling can provide diversification benefits by allowing you to profit from both rising and falling markets;
- Hedge against other holdings: By short-selling, you can hedge against assets that you are investing for the long term;
Cons
- High risk: Short selling has unlimited risk since the stock’s price can go up indefinitely;
- Margin calls: If your prediction is inaccurate, and the stock price goes up, you may have to deposit additional funds to cover potential losses;
- Short squeeze: If a stock’s value goes up suddenly, you might have to buy it back to avoid losses.
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 Microsoft stock
Can you short stocks without a margin account?
No, you usually need a margin account to engage in short selling.
Is shorting legal?
Yes, short selling is legal.
Where to short Microsoft stock?
You can short Microsoft stock on investment platforms such as eToro.
How to short MSFT?
You can short Microsoft stock using options, which let you sell Microsoft stock at a predetermined price within a specified timeframe.
You can retain the option until it expires, securing profits if the stock behaves according to your expectations. If the market moves differently from your predictions, the option might incur partial losses or expire.
You can sell your option on the market without waiting for it to expire. That involves accessing your trading platform, selecting an order type (such as market, limit, or trigger), and awaiting a buyer for your option contract.
Highly Rated Stock Trading & Investing Platform
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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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.
