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Summary: Shorting stocks can yield profits if done right, but it also comes with various risks. If you’re wondering how to short Nvidia stock (NASDAQ: NVDA), this guide will show you how to do it using a trusted broker platform, eToro.
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About Nvidia
Founded in 1993, Nvidia is a leading American multinational technology company renowned for its graphics processing units (GPUs) and system-on-a-chip units (SoCs) for the gaming and professional markets, as well as AI-driven solutions.
Besides being popular in the gaming industry, Nvidia’s products are widely used in data center, automotive, and professional visualization markets.
What is short selling?
Short selling is a trading strategy where an investor borrows shares of a stock from a broker and sells them on the market with the expectation that the stock’s price will decrease. The investor aims to buy back the shares at a lower price, return them to the broker, and pocket the difference as profit. It’s essentially betting against the stock’s performance.
Traditional Shorting
In traditional shorting, an investor borrows shares from a broker and sells them on the open market. If the stock price falls, the investor can buy back the shares at the lower price, return them to the broker, and profit from the difference. However, if the stock price rises, the investor faces potential losses, as they must buy back the shares at a higher price than they sold them for.
What are financial derivates?
On the other hand, investors can also short a stock through derivatives such as options, swap contracts, or futures contracts. These financial instruments allow investors to bet on the direction of a stock’s price movement without owning the underlying asset. Furthermore, we should also point out that even though derivatives can offer leverage and flexibility, they can also involve additional complexities and risks.
How to short Nvidia stock: Step-by-step
Shorting stocks can be a straightforward process, so we’ve come up with a simple step-by-step guide on how to do it in four short steps.
Step 1: Choose the right broker
To short Nvidia stock, you’ll need to open an account with a brokerage firm that offers shorting services. Our preferred platform is eToro—an esteemed online trading platform celebrated for its easy-to-use interface and wide array of financial products, such as CFDs (unavailable in the US) and options.
- Commission-free stock trading;
- Access to over 2,000 stocks from 17 different exchanges;
- Limited margin accounts;
- Charting tools;
- A user-friendly platform that simplifies the trading experience.
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.
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.
Step 2: Fund your account
Once you’ve chosen a broker, you’ll need to fund your trading account. This typically involves transferring funds from your bank account to your brokerage account. Nevertheless, be sure to deposit enough funds to cover any margin requirements for short selling.
Step 3: Open a short position
Go to the Nvidia stock page on your selected platform and tap on Trade. Pick your option’s expiration date and the strike price. Continue by inspecting the option’s pricing, risks, and other important metrics on the selection page. Then, determine the number of 100-share contracts you wish to purchase.
Lastly, double-check your trade details and swipe up to confirm the purchase. If you’re unsure, you can also save it as a draft.
Step 4: Manage your position
Once you’ve bought the option, you can keep it until it expires to potentially make a profit if the stock behaves as expected. However, if the market doesn’t go your way, your option might end up with a partial loss or become worthless upon expiry.
If you don’t want to wait until expiry, you can sell your option on the market. Simply go to your ticket, pick an order type (like market, limit, or trigger), set conditions if you choose a limit order, and wait for a buyer.
Nvidia stock price today
Pros and cons of shorting Nvidia stock
Pros
- Potential for profit if Nvidia’s stock price declines;
- Diversification of investment strategies;
- Can hedge against long positions in Nvidia or related stocks.
Cons
- Unlimited potential losses if Nvidia’s stock price rises;
- Margin requirements and borrowing costs;
- Short squeezes and other market risks.
If you want to short stocks of other big names in the tech sector, like Nvidia, you can check out our guides on these popular companies:
- How to Short Tesla Stock;
- How to Short Apple Stock;
- How to Short Amazon Stock;
- How to Short Microsoft Stock;
- How to Short Meta Stock;
- How to Short Alphabet Stock.
Common mistakes when shorting stocks
- Underestimating the risk of unlimited losses;
- Failing to set stop-loss orders to limit losses;
- Neglecting to consider potential dividend payments on shorted stocks;
- Overleveraging or trading on margin without proper risk management.
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 Nvidia stock
Can I short Nvidia stock with any broker?
Not all brokers offer short-selling services, so make sure to choose a broker that supports shorting and provides access to Nvidia’s stock. A convenient option is to register an account with eToro, as it’s one of the brokers that provides the option of shorting stocks.
How much does it cost to short Nvidia stock?
The cost of shorting Nvidia stock includes borrowing fees, margin interest, and any applicable commissions or fees charged by your broker.
What happens if Nvidia pays a dividend while I'm shorting the stock?
As a short seller, you may be required to pay the dividend to the lender of the shares you borrowed. You should, therefore, make sure to factor in potential dividend payments when calculating your overall profitability.
Highly Rated Stock Trading & Investing Platform
-
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.
-
eToro USA is registered with FINRA for securities trading.
