The Best Brokerages For Short Selling Penny Stocks

This post is a follow up to my previous blog about the Best Penny Stock Brokerages.

Oftentimes when penny stock traders enter the game of short selling penny stocks they assume just any old brokerage they use to buy penny stocks will be sufficient enough to short sell them too. Yet that assumption is WRONG. It has to do with 2 things:

1Some brokerages won’t let you short penny stocks

2The issue of share availability (borrows) comes into play

Your typical mainstream brokerages like Etrade, Scottrade, and TD-Ameritrade will not be tolerable when short selling penny stocks. I’ve heard horror stories of penny stock traders trying to short with these brokerages, specifically with these brokerages not having shares available to short a desired penny stock. When you’re short selling penny stocks down here in the gutter, they typically are coined “hard to borrow” stocks, i.e. shares available to short are limited.

So what does Etrade, Scottrade, and TD-Ameritrade all have in common? They all use the clearing firm Penson Financial. A clearing firm is an organization that works with brokers and exchanges for your trading transactions. They are the ones that control the shares available to short, etc.

The problem is that there are so many brokerages and accounts tied up with this specific clearing firm (Penson Financial) that shares are very very very limited because different brokerages are asking for shares left and right. Getting shares for these penny stocks is already hard enough, but this compounds the problem making it nearly impossible at times to find shares to borrow with these brokerages.

And yes this does include the Thinkorswim brokerage. They clear through Penson Financial aswell. So now you know why you can never get those shares…at 7 in the morning! While I do love Thinkorswim (customer service is fantastic) they just don’t cut it from a shorting penny stocks standpoint. Especially now that they were bought by TD-Ameritrade.

By now I’m sure you’re asking yourself “what ARE the best brokerages for short selling penny stocks?” The answer is easy – find a brokerage that is self clearing i.e does not work with a third party clearing firm. But I made it easy for you and list the 2 best brokerages that self-clear!

Interactive Brokers is a top-notch penny stocking self-clearing brokerage. It’s one of the best for short selling penny stocks as they usually have shares available for any penny stock, including pink sheets & otcbb’s. The 2 reasons I don’t use this brokerage – #1: They have a $10,000 minimum to open an account there, and since I’m poor, that automatically knocks me out.#2: They require you to be 21 years or older to open a margin account. (You have to have a margin account to short sell penny stocks). So since I’m only 18 that excludes me from opening an account there for..umm…3 more years. If it tells you anything about the quality of the brokerage 2 of the best pennystockers around Timothy Sykes and Muddy use this brokerage for short selling penny stocks.

SogoTrade is who I use to short sell my penny stocks with. They clear through Genesis Securities which is their parent company. Shares are almost always available to short any penny stock with an exception being below $1…but I don’t do that anyways. They even had shares of GOE, you know, this one. It was only allowed to trade 50,000 shares a day and somehow SogoTrade had some of those shares available to short. That tells you how good they really are with their borrows. I highly reccomend this brokerage to anyone who wants to profit from short selling penny stocks, especially if you have less than $10,000 as this brokerage seems to be the only feasible option in town. If you sign up with Sogotrade within the next few days make sure to use my referral code: 340190.

Tagged as: Penny Stock Basics