Sell Short Stop Order

A Sell Short Stop Order is an order to Sell Short a stock at a price below the current market price. Once a stock's price trades at or below the price you have specified, it becomes a Market Order to sell short.

Please note that is very similar to a Sell Stop Order, the only difference being a Sell Short Stop Order is used to ENTER a new short position, while a Sell Stop Order is used to EXIT an existing long position.

Example: Suppose you want to Sell Short 100 shares of Xerox Corp (XRX) if the price falls $2 more, since you believe that this will trigger the beginning of a much larger decline. Assume XRX is currently trading at $15 per share.

You place a Sell Short Stop Order @ $13 on XRX. Suppose XRX then proceeds to trade down to $13. At that time, your order would then become a Market Order to Sell Short and your order would be filled at the next best available price.

The main benefit of a Sell Short Stop Order is that you will only sell short IF price is showing downward momentum, which is what you want to see when Selling Short. Sell Short Stop Orders are great for entering new short positions in stocks that break below levels of support.

But, if the stock price reaches your stop price, the stock may change direction to the upside and you may have just sold short at its low. Also, once your stop price is reached and your order becomes a Market Order to Sell Short, you may be filled at a price higher or lower than your stop price.

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