Table Of Content
Is There a Time Limit on Short Selling a Stock?
Technically, there is no fixed time limit for how long you can hold a short position.
You can continue shorting a stock as long as your broker allows it and the stock is available to borrow. However, this doesn’t mean you can hold indefinitely without consequences.
For instance, if the stock becomes hard to borrow or if your broker recalls the shares, you may be forced to close your position.
Also, ongoing fees and margin requirements can pile up over time, especially in volatile markets.
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Famous Short Selling Trades and How Long They Lasted
Trader / Firm | Targeted Stock or Asset | Short Position Duration | Outcome |
|---|---|---|---|
Michael Burry (Scion) | Subprime mortgage CDOs | ~2 years (2005–2007) | Profited ~$100M+ |
Bill Ackman (Pershing) | Herbalife | ~5 years (2012–2018) | Lost; position closed |
Andrew Left (Citron) | GameStop | Days to weeks (2021) | Lost heavily |
Melvin Capital | GameStop | <1 month (2021) | Billions in losses; fund bailed out |
Jim Chanos (Kynikos) | Enron | Months (early 2001) | Profited |
What Happens If You Hold a Short Position for Too Long?
Holding a short position too long can backfire, especially in fast-moving or bullish markets. Here’s what can happen:
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Mounting Borrow Fees
When you short a stock, you're borrowing shares from another investor, and that comes with a daily borrowing fee.
If the stock is in high demand or has low availability—common with small-cap or meme stocks—these borrow fees can skyrocket.
For example, during the GameStop short squeeze in 2021, borrow rates jumped from single digits to over 50% annually, making it extremely costly to hold a short position for even a few days.
These fees eat into your returns and can turn a profitable short into a losing one.
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Margin Calls and Forced Liquidation
Short positions are held on margin, which means you're borrowing funds from your broker.
If the stock price moves against you, your equity in the account drops, and the broker may issue a margin call, demanding additional funds.
If you don’t meet the call, the broker can liquidate your position automatically to protect itself.
For instance, if you shorted a stock at $30 and it rises to $50, your broker may require more collateral—or close your position without notice—depending on the volatility and your account balance.
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Short Squeezes
A short squeeze happens when a stock with heavy short interest starts to rise sharply, prompting short sellers to buy back shares to cut their losses. This sudden demand pushes prices even higher, creating a cascade effect.
Unlike buying a stock, where the maximum loss is limited to your investment, short selling has no ceiling on potential losses
Because of this chain reaction, even experienced traders can be forced to exit positions at extreme losses, especially when the squeeze is driven by viral sentiment or coordinated buying.
Things To Consider When Holding A Short Position
Before holding a short position for the long term, consider these critical factors to manage risk:
Availability of Shares to Borrow – Brokers can recall borrowed shares at any time. If you're shorting a low-float or popular stock, this risk increases. For instance, small-cap stocks often become “hard to borrow.”
Dividend Payments – If you're shorting a dividend-paying stock, you’re responsible for paying those dividends to the lender. This adds to your cost over time, especially in long-term holds.
Market Sentiment Can Shift Fast – A company you bet against could release good earnings or get acquired, causing a sudden price jump.
Capital Efficiency – Short selling ties up margin, which could be used for other trades. Therefore, consider whether holding the position is worth the opportunity cost.
Broker Fees and Rules – Different brokers have different shorting policies, including interest charges and minimum equity requirements. Check your broker's short selling terms before entering a long-term short.
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Key Lesson From Famous Short Selling Trades
Targeted Stock or Asset | Short Position Duration | Outcome | Key Lesson |
|---|---|---|---|
Subprime mortgage CDOs | ~2 years (2005–2007) | Profited ~$100M+ | Patience and conviction can pay off in complex trades. |
Herbalife | ~5 years (2012–2018) | Lost – position closed | Even long-term shorts with research can fail due to market resistance. |
GameStop | Days to weeks (2021) | Lost heavily | Rapid retail-driven rallies can destroy short positions quickly. |
GameStop | <1 month (2021) | Billions in losses | High short interest plus retail activity = dangerous combination. |
Enron | Months (early 2001) | Profited | Fraudulent companies may eventually collapse—but timing is crucial. |
How Margin Interest Affects Short Selling Duration
When you short a stock, you’re borrowing shares through a margin account, which means you’ll owe margin interest for the duration of the trade. This interest is charged daily and compounds over time, especially if you hold the position for weeks or months.
For example, if your broker charges 9% annual interest on the borrowed funds, the longer you hold, the more costly the trade becomes.
Therefore, even if the stock price doesn’t rise significantly, margin interest can slowly erode your profits or increase your losses.
Always check your broker’s margin rates before holding a short long-term.
FAQ
You can hold a short position indefinitely in theory, but in practice, broker rules, borrow fees, and market conditions often make it unsustainable over the long term.
If the shares you’re borrowing become unavailable, your broker may force you to close the position regardless of market price, even if you’re still bearish.
Yes, many traders hold short positions overnight, but doing so comes with added risks like after-hours news or earnings reports that can cause big price swings.
Recalls aren't common for liquid stocks, but they do happen more frequently with hard-to-borrow or low-float stocks, especially during volatile periods.
Shorting penny stocks can be difficult and risky due to extreme volatility, limited borrow availability, and rapidly changing borrow fees that increase costs.
Yes, aggressive shorting can temporarily push stock prices down, but if too many traders short a stock, it could trigger a short squeeze and reverse the trend.
You can't “roll over” a short position like you would with options, but you can close and reopen it manually, assuming the stock is still available to borrow.
Shorting in pre-market hours depends on your broker. Even if allowed, lower liquidity and wider spreads make pre-market shorting much riskier.
Tools like trailing stop-loss orders, real-time borrow rate trackers, and risk calculators can help manage long-term short positions more safely.
Short interest data is available publicly but with a delay. This makes it hard to track real-time short activity but useful for spotting highly shorted stocks.
Short positions don’t expire like options contracts. However, they can be closed by the broker due to a lack of collateral or share availability.
