How to Buy and Sell Stocks and ETFs (Long and Short)

Do you have a hunch on a company, a sector, or a specific industry? Investors can gain direct exposure by investing in a company’s common stock or through an exchange-traded fund (ETF) for diversified exposure in a sector or industry. Before diving into all the different types of stocks available to investors, let's briefly cover the directional stance investors can take to benefit from investing in stocks.

Investors can take one of two stances when establishing a stock position: long or short. Visit the tastytrade Help Center to learn more about placing a long or short stock order on the tastytrade trading platform.

Learn more about stocks

When the general public thinks about investing, buying stock is usually the first thing that comes to mind. Establishing a stock position by buying shares is inherently bullish since the objective is to sell the shares above the purchase price to yield a profit. When investors purchase stock, it can also be called “being long” stock. In other words, being long refers to a position type that investors must purchase to establish. Investors at tastytrade can establish a long stock position in any kind of account, including cash, margin, and IRA accounts.

Furthermore, investors with a margin account can buy stock on margin or borrow cash if the margin account has at least $2,000 in marginable equity (cash and eligible position types). Although there is no minimum to open a margin account, a minimum is required to have and maintain margin privileges (borrow cash to establish stock positions). On the other hand, cash accounts cannot borrow and do not have a minimum balance requirement.

• Buy to open 100 shares of XYZ @ $45
• Cost: $4,500 debit

Using the Strategy Menu

1. Enter a symbol.
2. Navigate to the Trade tab.
3. Locate the Stock strategy and click each column to display Long, Stock, and Go.
4. Go to the order ticket to determine the quantity, price, time-in-force (TIF), etc., before clicking "Review & Send" to send the order.

Building it Manually

1. Enter the symbol.
2. Click the Ask price
3. Go to the order ticket to determine the quantity, price, time-in-force (TIF), etc., before clicking "Review & Send" to send the order.

When investing in stocks, investors usually think of going long by purchasing shares in hopes of price appreciation. However, investors can also establish a short stock position which benefits an investor when the stock price falls. As a result, a short stock position is inherently bearish. Instead of buy-to-open and sell-to-close, which describe opening and closing a long stock position, it is the opposite when going short or sell-to-open and buy-to-close.

When an investor establishes a short stock position, the investor initially will sell-to-open a short position and collect the sale proceeds from the short stock sale. When closing a short stock position, an investor covers or buy-to-close the short position. The best case is to buy the short shares back to cover at a lower price than the sale price to yield a profit.

Some unique characteristics of establishing and holding a short stock position are the additional risks and potential costs. Some of the risks include but are not limited to:

1. Unlimited loss potential

2. Owing dividends and other cash distributions

3. Hard-to-borrow fees

First, a short stock position theoretically has unlimited loss potential since a stock can continually rise in perpetuity. Secondly, investors holding a short stock position in an underlying that pays any dividend or cash distribution will also be responsible for paying them when maintaining a short share position. Lastly, investors may face hard-to-borrow (HTB) fees while maintaining a short stock position when the demand to short the specific underlying increases. Please visit the tastytrade Help Center to learn more about HTB fees.

Establishing a short stock position at tastytrade requires a margin account with our highest trading level—"The Works."

• Sell to open 100 shares of XYZ @ $45
• Effect: $4,500 credit

Using the Strategy Menu

1. Enter a symbol.
2. Navigate to the Trade tab.
3. Locate the Stock strategy and click each column to display Short, Stock, and Go.
4. Go to the order ticket to determine the quantity, price, time-in-force (TIF), etc., before clicking "Review & Send" to send the order.

Building it Manually

1. Enter the symbol.
2. Click the Bid price.
3. Go to the order ticket to determine the quantity, price, time-in-force (TIF), etc., before clicking "Review & Send" to send the order.