Shorting Stocks in the UK
Shorting stocks is a powerful strategy that can help to diversify your portfolio and can be used as a hedge against long-term bearish sentiment. However, it is extremely risky and novice investors should perhaps avoid it.
When someone shorting stocks in the UK a stock, they borrow shares from their broker and sell them at market price, speculating that the share will fall after the sale. They then aim to repurchase the shares at a cheaper rate, return them to their broker and pocket the difference.
The process of shorting shares is regulated in the UK, with the Financial Conduct Authority (FCA) requiring that investment firms publicly disclose their net short positions in certain UK-listed companies. This obligation arises when a position holder’s net short positions in UK-listed securities exceeds an initial threshold of 0.1% of all shares in the company (or 0.5% for certain companies).
In addition to traditional brokers, many UK traders use leveraged trading tools such as spread betting and CFDs to speculate on market price movements, without having to wait to borrow shares from specialist share lenders or pay these fees. Both of these methods offer a cost-effective way to short shares, and profits are commonly tax-free* in the UK and Ireland.
To trade short in the UK, you will need to open a brokerage account that allows it. You can also access a wide range of exchange traded products (ETPs) which enable you to short shares with the click of a button. For example, GraniteShares offers a suite of Short Single Stock Daily ETPs that track some of the most popular UK and US stocks.