Dive deeper: How to short a stock
10 most shorted stocks
Betting on heavily shorted stocks can mean big rewards. But with high rewards come high risks.
10 most shorted stocks
Here are 10 of the most shorted stocks based on 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 % | 1Y performance |
|---|---|---|
| Digital Brands Group Inc. (Nasdaq: DBGI) | 58.56% | -98.37% |
| Kalera Public Limited Company (Nasdaq: KAL) | 55.46% | -99.13% |
| OncoSec Medical Incorporated (Nasdaq: ONCS) | 49.49% | -94.00% |
| Mullen Automotive, Inc. (Nasdaq: MULN) | 47.40% | -95.24% |
| Carvana Co. (NYSE: CVNA) | 46.21% | -97.68% |
| Bed Bath & Beyond Inc. (Nasdaq: BBBY) | 46.20% | -82.15% |
| Tricida, Inc. (Nasdaq: TCDA) | 44.58% | -98.02% |
| PaxMedica, Inc. (Nasdaq: PXMD) | 44.46% | -48.65% |
| Beyond Meat, Inc. (Nasdaq: BYND) | 42.33% | -78.11% |
| Silvergate Capital Corporation (NYSE: SI) | 39.88% | -87.27% |
Source: MarketWatch (Dec. 14, 2022)
How does stock shorting work?
When shorting a stock, investors borrow and resell stocks they believe will decline in value. These investors hope the stock will continue to fall in value, so they can buy back the stocks at a lower price and pay off the loan, pocketing the difference.
Essentially, it’s betting that the value of a stock will fall. If you’re right, you make money. If you’re wrong, you could lose a lot more than you bargained for. That’s because there aren’t any limits to how high a stock’s price may rise, and the more it rises, the more you lose.
Taking a contrary position to shorting can be profitable, too. By investing in a shorted stock, you contribute to the stock’s value. As a result, the stock price rises and puts pressure on those with short positions to close positions by buying even more — which drives the price up further.
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.
The risks of shorting stocks
Before you hop on any short stock bandwagons, take a moment to consider the risks.
No investment is risk-free, especially short selling, which should only be attempted by experienced investors. 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.
Even though backing a shorted stock may seem like a lucrative opportunity, 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.
Shorted stocks are volatile and behave erratically. Before getting involved, monitor your positions carefully.
Open a trading account to short sell stocks
4 of 4 results
Finder Score for stock trading platforms
To make comparing even easier we came up with the Finder Score. Trading costs, account fees and features across 10+ stock trading platforms and apps are all weighted and scaled to produce a score out of 10. The higher the score, the better the platform—it's that simple.
Bottom line
Short selling is risky — but 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 brokerage options to find one that best fits your investment goals.
Related: Stock trading
Important information: Powered by Finder.com. This information is general in nature and is no substitute for professional advice. It does not take into account your personal situation. 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 most investors. You do not own or have any interest in the underlying asset. Capital is at risk, including the risk of losing more than the amount originally put in, market volatility and liquidity risks. Past performance is no guarantee of future results. Tax on profits may apply. Consider the Product Disclosure Statement and Target Market Determination for the product on the provider's website. Consider your own circumstances, including whether you can afford to take the high risk of losing your money and possess the relevant experience and knowledge. We recommend that you obtain independent advice from a suitably licensed financial advisor before making any trades.
More on investing
Stock Trading
We break down which companies hold Ethereum, why they’re doing it and what ETH treasuries mean for markets and investors.
Stock Trading
Want to invest in the Euro Stoxx 50 in Canada? Explore investment platforms and popular Euro Stoxx 50 index funds.
Stock Trading
What are the best stocks for beginners with little money to invest?
Want to dive into investing but don’t have much to spend? Take a look at these types of stocks.
More resources on Finder
More guides on Finder
-
Best day trading platforms in Canada
Compare six brokerage platforms to find the best platform for day trading in Canada.
-
9 medical device stocks to watch
Want to invest in medical device companies? We’ve put together a list of medical device stocks you should keep your eye on.
-
12 leisure stocks to watch
Want to invest in leisure companies? We’ve put together a list of leisure stocks you should keep your eye on.
-
9 medical supplies stocks to watch
Want to invest in medical supplies companies? We’ve put together a list of medical supplies stocks you should keep your eye on.
-
8 nursing home stocks to watch
Want to invest in nursing home companies? We’ve put together a list of nursing home stocks you should keep your eye on.
-
7 luxury stocks to watch
Want to invest in luxury goods companies? We’ve put together a list of luxury goods stocks you should keep your eye on.
-
7 toilet paper stocks to watch
Want to invest in paper product companies? We’ve put together a list of toilet paper stocks you should keep your eye on.
-
8 homebuilding stocks to watch
Want to invest in private construction companies? We’ve put together a list of homebuilding stocks you should keep your eye on.
-
Best renewable energy stocks
These are the best renewable energy stocks to buy now in Canada.
-
How to buy US stocks in Canada
Buying US stocks in Canada is easier than you think. Find out how to buy US stocks in 4 simple steps.