Shorting Stocks

In order to short stock, you must have a margin account, broker approval to short stocks, the stock must be borrowable, and the margin to support the position (50% of the value of the position). Brokers also impose a minimum account size which last I knew was $2,000 for TD Ameritrade.

There's a secondary issue that often comes into play. For 70 years, the Uptick Rule required an uptick to short a stock. That was abolished in 2007.

In 2010, the SEC implemented the Alternate Uptick Rule which states that if a stock falls 10% from the previous day’s close, it can only be shorted on an uptick. IOW, the stock cannot be shorted while it’s falling. This restriction stays in force through the end of day the stock drops 10% and for the following trading day as well.

PLAY became subject to the Alternate Uptick Rule a little bit after 4 AM EST this morning.

I'd suggest that you AVOID shorting stocks until you are quite knowledgeable about the process and you understand disciplined risk management. Don't get me wrong, I am quite comfortable shorting and I was net short many different stocks in 2008 and 2009. The first position that I shorted was Compaq Computer about 20 years ago and I did not have the aforementioned abilities. When it moved against me I learned a lesson that I never repeated.

In addition the brokerage must be able to borrow the stock from an account that is holding it. If everyone is trying to short it they may not have the shares to do it.