So, I want to start shorting tech stocks just after their IPO's. How do I do it? What trading programs/companies/services do you use that actually allow you to short stock and what are their rates?
Edit: Pandora isn't worth that much either in my humble opinion.
http://www.amazon.com/Money-Selling-Stocks-Short-Trading/dp/...
If you don't get what the authors are saying, that's probably a sign that what you're about to do is gambling. If you want to gamble, great, but it's important to understand when you are gambling, and to understand whether your grasp of the odds in any way correlates to reality - and that's the big challenge in learning to trade.
Secondly, you should look at a good broker like Interactive Brokers: they offer a paper trade account for free, and a wide range of information on their website. Their software is excellent. If you find either their software or the information for individual investors on their website tough going or enormously intimidating (e.g. suddenly you realize that you're running an application that quite literally runs on money...), then that is also a sign that what you are about to do is gambling on unknown odds.
http://www.interactivebrokers.com
If looking at these things dissuades you, then you will have learned something useful along the way - and hopefully it interests you enough to go look at other resources that teach a much better way to interact with the market.
I find their software to be average but you can't beat their prices. They charge 0.005$ (half a cent) per share with minimum of 1$ commission. So if you trade less than 200 shares, your commission is 1$. If you trade 1000 shares, you pay 5$ in commission. Compare this to other brokers who charge you 9$/trade regardless of your trade size.
Also, they are one of the only brokers will EXCELLENT short borrows.
There are numerous trading software available in the market who integrate with Interactive Brokers account.
I am not affiliated with them in any way, just a very happy customer.
Let's take a step back and discuss what you're doing, though. Shorting a stock is a way of betting that it will go down, but it's not the only or necessarily the best way. Remember, taking a short position in a stock has potentially unlimited downside, depending on your margin arrangement: the stock price can always go up, and if your margin gets called, you could end up losing a lot of money.
Two other relatively easy ways to bet against a stock are to buy-to-open put options (limited downside) or sell-to-open call options (unlimited downside).
A put option is the right to sell a particular stock at a specific price before the expiration date of the contract. So, if you own a put option, you can sell stock for some amount, no matter what its present market price is. So, if the price of a share is very high right now, and you think it will go down, you can buy puts, wait for the price to go down, and either exercise or (more commonly) turn around and sell the puts. The maximum amount of money you can lose is your initial investment: the value of the puts can go to $0, but no lower. On the other hand, you're highly leveraged: if you buy barely out-of-the-money puts on a stock for $1, then the price of the stock drops by $10, your puts will potentially go up in value by $10 or more (the price of options is strongly influenced by the volatility of a stock and by its recent history), so you could make 10x your money.
If you sell call contracts, you're selling someone else the right to buy stock for a given price---and agreeing to be the counter party if the options get exercised. If you think that a stock is going to go down, but everyone else thinks it will go up, you can sell call options contracts. Then, if you prove to be right, you pocket the money you made selling the contracts and you're done. Of course, if the stock goes up a whole bunch and you don't have shares to cover it, you could be forced to buy shares at a much higher price than the contract, and you'll lose money. You can see how in this case the downside is unlimited.
So: shorting gives unlimited downside and leveraged upside (you pay someone interest to borrow shares that you sell and then later buy back and repay when the stock has gone down). Buying puts gives limited downside and leveraged upside. Selling calls gives unlimited downside and unleveraged upside (you make what you sell the contracts for, and nothing more).
(These are rough approximations to the truth, and if you're going to engage in short selling or writing naked calls, you'd better learn a hell of a lot more than reading one post on the internet from some random guy who can't even spell his username correctly.)
Buying puts is a far, far safer way of betting against a company, and you don't need a margin account to do it. If I were you, I'd strongly consider doing this.
(I regularly buy puts and calls as a way of making leveraged short-term trades. In fact, pretty much all my short term trading is options, and my long positions tend to be longer term. I do not regularly short or sell uncovered calls, however, because these are frankly dangerous pastimes.)
Though not all securities [E.g. Penny Stocks] have liquid options, and in those cases, you will have to borrow the stock to short it. As OP states, you will need to have a margin account to be able to borrow and short a stock.
E.g. Let's look at LNKD options.
http://www.marketwatch.com/investing/stock/lnkd/options
If you think that LNKD will tank in July 2011, you can buy Jul 77.50 PUTS for 7.35$. Let's say you buy 100 PUTS. Your total outlay will be 7.35 x 100 = 735$. If it goes down, your option price will increase and you can sell them and cash in your money. If for some reason, LNKD shoots up and goes to 100$ again, your option will be worthless and you would lose your 735$ which you paid.
Let's compare this to actually shorting LNKD. First, to short 100 shares at 77.50, you will need at least 77.50 x 100 = 7750$ in margin. If LNKD goes to 100$, you are down by (100 - 77.50) * 100 = 2,250$.
As you can see, PUT option lets you make a bet with much less capital (735$ vs 7750$) if you think LNKD is not worth 77.50$.
Please be very careful before you enter the world of stock market. It's very seductive and there is a high chance you will lose serious money if you don't understand what you are doing.
http://www.cnbc.com/id/43098403/Why_You_Cannot_Short_LinkedI...
I use Schwab, they have a great trading platform, easy to use, and easy accounts to set up.
you have to wait about a week after the IPO until the options start trading.