Your inputs

Model a short position

Short entry price

The price you sell borrowed shares at.

Cover price

The price you buy back at — profit if lower than entry.

Whole shares sold short, from 1 through 100,000,000.

Advanced assumptions

Annual borrow rate

The stock-loan fee; hard-to-borrow names run high.

Days held

How long the position stays open, from 0 through 3,650 days.

Initial margin

Equity required to open the short — Reg-T default is 50%.

Maintenance margin

Minimum equity to keep the short open — 30% is typical for shorts.

Your inputs are calculated locally and are not stored.

Net profit$973.70

Shorting 100 shares at $40.00 and covering at $30.00 makes $1,000.00 before costs; after $26.30 of borrow fees the net is $973.70 — a 48.68% return on the $2,000.00 of required equity.

Short proceeds: $4,000.00
Gross profit: $1,000.00
Borrow fee: $26.30
Required equity: $2,000.00
Return on equity: 48.68%
Margin call above: $46.15

Formula & methodology

How short-sale math works

A short sale profits when the price falls: you sell borrowed shares at the entry price and buy them back — cover — at a lower price. Gross profit is the entry-to-cover spread times the share count. While the short is open, a stock-loan borrow fee accrues daily on the entry proceeds. Under a Reg-T style margin account you must post initial equity to open the short, and if the price rises far enough that your equity falls to the maintenance requirement, the broker issues a margin call. Because the price can rise without bound, the potential loss on a short position is theoretically unlimited.

Gross profit = (Entry − Cover) × Shares
Borrow fee = Proceeds × Rate × Days ÷ 365
Margin call price = Entry × (1 + Initial%) ÷ (1 + Maintenance%)

Entry: Price the borrowed shares are sold at
Cover: Price paid to buy the shares back
Shares: Whole shares sold short
Proceeds: Entry price × shares
Rate: Annual borrow rate on the stock loan
Days: Days the short stays open
Initial%: Initial margin requirement, Reg-T 50%
Maintenance%: Maintenance margin requirement, often 30%

Worked example

Shorting 100 shares at $40, covering at $30

Suppose you short 100 shares at $40, which puts $4,000 of proceeds in the account, and later cover at $30 for a $1,000 gross profit. Borrowing the shares at an 8% annual rate for 30 days costs $26.30 in fees ($4,000 × 8% × 30 ÷ 365), so the net profit is $973.70. Opening the short under Reg-T requires 50% initial margin — $2,000 of equity — so the net result is a 48.68% return on that required equity. With a 30% maintenance requirement, a rise in the share price above $46.15 would trigger a margin call.

This is an educational calculation based only on the values you provide. It does not look up live prices or borrow rates, and it is not investment advice.

Assumptions

What this calculator assumes

The borrow fee is approximated on the entry proceeds for the whole holding period. Real brokers mark the loan to market daily, so the actual fee drifts with the share price.
No dividends-in-lieu are modeled. Short sellers owe any dividend paid while the short is open to the share lender, which directly reduces profit.
Margin uses Reg-T style percentages. Brokers can and do require more than the regulatory minimums, especially on volatile or hard-to-borrow stocks.
No commissions, taxes, or short-sale rebates are modeled.
Losses are theoretically unlimited because the share price can rise without bound.
Money values are rounded to the nearest cent for display.

Common questions

Short selling FAQ

Why are short losses unlimited?

When you buy a stock, the most you can lose is what you paid — the price stops at zero. A short position loses money as the price rises, and there is no ceiling on how high a price can go. A stock shorted at $40 that runs to $120 loses twice the original proceeds, and it can keep going. That is why brokers require margin and why the margin-call price matters.

What is a buy-in / forced cover?

The shares you short are borrowed, and the lender can recall them at any time. If your broker cannot find replacement shares to borrow, it can buy shares at the current market price to close your position — a buy-in or forced cover — without waiting for your approval, and often at the worst possible moment for the trade.

What are dividends in lieu?

If the company pays a dividend while you are short, you owe that dividend to the person your shares were borrowed from — a payment in lieu of the dividend. It comes straight out of your account and reduces the profit of the trade. This calculator does not model dividends in lieu, so shorting a dividend payer will cost more than the result shown here.

Primary sources

Sources and review notes

U.S. Securities and Exchange Commission, Investor.gov — Short Sales glossary
FINRA — Margin Accounts, investor guidance
Kathryn F. Staley, The Art of Short Selling, Wiley

Methodology last checked Jul 16, 2026. Formula implementation is covered by deterministic unit tests. No financial professional review is claimed yet.