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How to short the Nasdaq

Find out how to short the second biggest stock exchange in the world.

In turbulent times, it’s a given that people want to short the Nasdaq, given that it’s the second largest stock exchange in the world. While it’s unlikely that you can get exposure to the entire stock exchange, you can invest in Nasdaq ETFs or in the Nasdaq Composite Index.

What does “shorting” the Nasdaq mean?

Short selling, or “shorting,” is a method of trading that allows you to take advantage of a decrease in an asset’s value. You short a stock by borrowing the asset from a broker to sell it, then purchase it back later at a (hopefully) lower price. It’s particularly popular to short a stock or market when there’s a stock market crash, such as during the coronavirus stock market crash.

How to short the Nasdaq

There are loads of different ways that you can short the Nasdaq. The most commonly used method for the average investor is to invest with inverse exchange-traded funds (ETFs). Another method is to take a short position on the Nasdaq with CFDs.

Invest in inverse ETFs

Inverse ETFs track an underlying index, such as the Nasdaq, but instead of following it closely, it moves in the opposite direction. So let’s say the NASDAQ was to rise in value by 2%, an inverse ETF that’s tracking it will decrease in value by 2%.

People generally invest in inverse ETFs to get profits in a very short period of time. It’s for this reason that they can be known as “ultra-short funds”.

You can get leveraged inverse ETFs, which can give you 2X or 3X times the exposure that you’d usually get. “Leverage” refers to borrowing effectively, so it’s possible to lose more than your initial investment with this method. Make sure you understand the risks.

How to short the Nasdaq with derivatives

Another way of shorting the Nasdaq is to take a short position using derivatives. This allows you to take a position on the stock without actually owning it. Some of the more commonly-used derivatives include options, futures, warrants and contract for differences (CFDs).

For example, you could take a short position on a selection of the stocks that are on the Nasdaq like Apple, Amazon, Netflix and Tesla. Alternatively, you can open a position on the Nasdaq 100 index, as long as the provider you choose allows you to.

How to short the Nasdaq: Step-by-step

  1. Choose a provider. There are loads of different platforms out there, and more are popping up all the time. Make sure you don’t choose a stock trading platform without careful consideration. Have a look at fees, features and trading options to make sure you can make the types of investments you want to.
  2. Open an account. You’ll need to open an account with your chosen provider. You may need to provide your Social Insurance Number (SIN) and personal ID like a valid driver’s license or passport.
  3. Deposit funds into your account. If you’re investing in fund listed on a foreign exchange, you may need to pay a foreign exchange fee to convert your funds into Canadian dollars.
  4. Take a short position, or invest in a Nasdaq inverse ETF. Usually, you can start trading as soon as your account is set up and funds have been deposited.

Compare investment platforms

warning iconWarning: Many investors lose money when trading CFDs. CFDs are complex instruments and come with a high risk of losing money rapidly. Make sure you fully understand how CFDs work and carefully consider whether you can afford to take on the risk of losing money.
Name Product Available Asset Types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
OFFER
Wealthsimple Trade
Stocks, ETFs
$0
N/A
$0
Free
Get 2 free stocks when you open a Wealthsimple Trade personal account and deposit and trade at least $150.
Pay no commissions when you trade Canadian stocks and ETFs with Wealthsimple Trade.
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
BMO InvestorLine
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$9.95
$9.95 + $1.25 per options contract
$0 if conditions met, otherwise $25/quarter
$0 - $9.95
Buy and sell a select group of Canada’s most popular ETFs without paying commissions.
An easy-to-use online trading platform with access to research, tools, and the option to access InvestorLine adviceDirect for additional professional support.
Scotia iTRADE
Bonds, Options, Mutual Funds, ETFs, GICs, International Equities
$4.99-$9.99
$9.99 + $1.25 contract ($4.99 + $1.25 contract if completed 150 trades or more a quarter)
$0
$9.99 ($4.99 if completed 150 trades or more a quarter)
Pay no annual account fees.
Buy, sell and trade ETFs, Equities, Options and more with competitive commissions.
CIBC Investor's Edge
Stocks, Bonds, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$6.95
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95-$9.95
$9.95 + $1 per contract
$0
Free
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
OFFER
Qtrade Direct Investing
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Get up to 50 free trades. Be one of the first 100 new Qtrade clients to use the promo code 50FREETRADES and deposit a minimum of $10,000 (or top up to $15,000 to get $150 transfer fees waived). Valid until December 31, 2021.
Qtrade Direct Investing offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.
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Name Product Minimum Opening Deposit Commission Available Markets Platforms
Blackbull Markets
US$200
$0 - $6.00 R/T per Lot
Forex
Metals
Commodities
MetaTrader 4
CFDs are leveraged products which involves greater risk than using cash resources only. You could lose all or more of your initial investment. Trade forex, CFDs and commodities with Blackbull Markets.
Forex.com
US$100
Minimum US$25
Forex
Metals
Commodities
Indices
Shares
Forex.com Desktop, Forex.com Web Trading, Forex.com Mobile Trading, MetaTrader 4
CFDs are leveraged products which involves greater risk than using cash resources only. You could lose all or more of your initial investment. Trade 80+ currency pairs and 220+ CFDs in equities, commodities and indices on Forex.com.
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What is the Nasdaq Composite Index?

The Nasdaq Composite Index—also known as the Nasdaq Composite—is made up of over 3,000 stocks and shares that are listed on the Nasdaq exchange.

Some of the biggest stocks in the world are on the Nasdaq, including the FAANG stocks, which include Amazon, Google, Apple, Facebook and Netflix.

How is the Nasdaq Composite Index performing?

The graph below tracks how the Nasdaq Composite Index has performed over the 3 months. Figures are stated in US dollars.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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