Leverage, Margin & Short Selling

Borrowing, margin calls and the risks of shorting.

1. How Margin Accounts Work — A margin account lets you borrow from your broker to buy more stock than your cash alone allows. Here is how margin loans work, the rules that limit them and how leverage magnifies both gains and losses.
2. Margin Calls — A margin call happens when your equity falls below the broker’s minimum and you must add money or sell. Here is how to calculate when a margin call hits, what happens if you cannot meet it and a real stock that fell 77%.
3. Short Selling Mechanics — Short selling means borrowing shares, selling them and hoping to buy them back cheaper. Here is how a short sale works step by step, what short sellers owe and the rules that govern it.
4. Borrow Fees & Hard-to-Borrow Stocks — The cost of borrowing shares ranges from almost nothing to more than the stock could reasonably fall. Here is how borrow fees work, what makes a stock hard to borrow and how fees can sink a short even when you are right.
5. Short Squeezes — A short squeeze happens when rising prices force short sellers to buy, pushing prices even higher. Here is how squeezes unfold, the famous GameStop and Volkswagen cases and the warning signs.
6. Unlimited Loss Risk — When you buy a stock, the most you can lose is what you paid. When you short, there is no ceiling. Here is why short losses are unlimited, how gaps make stops unreliable and ways to limit the damage.