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Short selling can be profitable, but there are significant risks to consider. Here are 10 of the most-shorted U.S. stocks to keep an eye on, and how shorting works.
10 most heavily shorted stocks
Here are the 10 most heavily shorted stocks as of this writing by short float percentage. Short float percentage refers to the percentage of a company’s stock that institutional investors have shorted compared to the stock available for public trading.
Stock
Short float percentage
Revlon (NYSE:REV)
77.60%
Singing Machine Company (NASDAQ:MICS)
63.23%
Redbox Entertainment (NASDAQ:RDBX)
57.45%
Heron Therapeutics (NASDAQ:HRTX)
54.70%
Arcimoto (NASDAQ:FUV)
40.47%
Beyond Meat (NASDAQ:BYND)
40.30%
AeroClean Technologies (NASDAQ:AERC)
40.29%
Big Lots (NYSE:BIG)
38.81%
Phillips Edison & Co (NASDAQ:PECO)
38.53%
Carvana (NYSE:CVNA)
38.23%
Why do shorted stocks matter?
For evidence of the power of shorted stocks, look no further than GameStop. In January 2021, GameStop was among the most shorted stocks on Wall Street. The hedge funds that bet against it stood to make a lot of money if GameStop’s stock stayed low. But participants in the Reddit message board Wallstreetbets noticed the GameStop shorting trend and decided to raise its price and squeeze hedge funds that had bet against the company. Thanks to Reddit, retail investors flocked to buy GameStop’s stock. As a result, the stock skyrocketed in value by over 1,000%. And the hedge funds that shorted the stock lost billions. There’s money to be made in shorting stocks, but the GameStop rollercoaster ride demonstrates just how dangerous and temperamental the game can be. Before getting involved, investors should exercise caution. To learn more, check out our guide on how to short stocks.
Our pick for short selling: Interactive Brokers
$0 stock trade fee
Access to 150 global markets
Margin lending rates of 3.58% to 4.58% (with IBKR Pro)
Before you hop on any short stock bandwagons, take a moment to consider the risks. First, no investment is risk-free — something that holds especially true of investing in shorted stocks. Implementing short selling as a trading strategy is something that should only be attempted by experienced investors. And that’s because if you short a stock and the price unexpectedly goes up, you may owe far more than your initial investment — especially if the rising stock price causes other short sellers to start closing out their positions. And on the other side of this equation, backing a shorted stock may seem like a lucrative opportunity, but stocks under this type of pressure tend to be highly volatile. With no clear exit strategy, you could stand to lose a sizable amount of capital. Before getting involved in short stocks, be prepared to monitor your positions with attention and care. These stocks are volatile and behave erratically.
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Bottom line
Short selling is risky — and potentially lucrative. Do the risks outweigh the potential gains? It depends on your investment goals and experience level. To invest in shorted stocks, review your platform options to find the brokerage account that best fits your investment goals.
Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga.
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