Stock Mkt.: Securities Lending to Make Extra $
Posted: Wed Aug 23, 2023 9:28 pmFor anyone who is invested in the stock market, I have something that might be of interest to you.
You may love a stock that you think will double or triple in no time, but somewhere there is a hedge fund or person who wants to bet the stock might go down sharply or even go bankrupt. That's what makes a market.
Sometimes when a potential short seller wants to bet on a stock going down, they get a message saying the stock is hard to borrow. In other words, they might be able to get shares to borrow so they can short the stock, but they would likely have to pay a fee to short the stock.
Sometimes, the fees can be VERY SUBSTANTIAL. I'll give you a specific real-world example in a minute.
Now, if you own Microsoft (MSFT), Apple (AAPL) or even Nvidia (NVDA), there would almost always be no fee to short the stock. Why? Because these stocks have so many shares available in their floats (freely traded shares not owned by insiders) that there is no need to charge a fee- not now and perhaps never in the future as well.
I'm talking about stocks that are far from household names, are perhaps thinly traded, and can move wildly. That's where the fees can be substantial, and that creates an opportunity for someone who owns (is long) the stock.
Keep in mind that these things change rapidly. What pays you (the shareholder who owns the stock) a big fee now, can be a fee of zero in a few weeks to a few months. Here is my example: Lifezone Metals (LZM), a nickel producer that hasn't been trading very long. LZM closed today (Wednesday) at $14.25 a share. I have 500 shares and currently have a small loss in my IRA account. My broker (Schwab) approached me about making these shares available to a potential short seller. They told me that at the present time they will pay me a WHOPPING $673 PER MONTH to loan these shares out to a potential short seller. This equates to a return of OVER 100% A YEAR, which is staggering. I confirmed that the fee is actually higher than that. Often times the broker will keep half of the fee. So that means this fee is likely a gross of over 200% a year- half to me and half to Schwab.
You can think what you want about short sellers, but I personally have shorted thousands of stocks over the years with my own personal money. If you can get over the stigma of helping out the competition, just realize that the fee you are receiving is potentially huge.
I don't have a list of stocks which charge huge fees like this and, believe me, I'd love to. I'd imagine it will be different from one broker to another.
If you are looking for out of the box ways to make money, and sometimes substantial money, here is one that is definitely not well known to investigate a bit further.
You may love a stock that you think will double or triple in no time, but somewhere there is a hedge fund or person who wants to bet the stock might go down sharply or even go bankrupt. That's what makes a market.
Sometimes when a potential short seller wants to bet on a stock going down, they get a message saying the stock is hard to borrow. In other words, they might be able to get shares to borrow so they can short the stock, but they would likely have to pay a fee to short the stock.
Sometimes, the fees can be VERY SUBSTANTIAL. I'll give you a specific real-world example in a minute.
Now, if you own Microsoft (MSFT), Apple (AAPL) or even Nvidia (NVDA), there would almost always be no fee to short the stock. Why? Because these stocks have so many shares available in their floats (freely traded shares not owned by insiders) that there is no need to charge a fee- not now and perhaps never in the future as well.
I'm talking about stocks that are far from household names, are perhaps thinly traded, and can move wildly. That's where the fees can be substantial, and that creates an opportunity for someone who owns (is long) the stock.
Keep in mind that these things change rapidly. What pays you (the shareholder who owns the stock) a big fee now, can be a fee of zero in a few weeks to a few months. Here is my example: Lifezone Metals (LZM), a nickel producer that hasn't been trading very long. LZM closed today (Wednesday) at $14.25 a share. I have 500 shares and currently have a small loss in my IRA account. My broker (Schwab) approached me about making these shares available to a potential short seller. They told me that at the present time they will pay me a WHOPPING $673 PER MONTH to loan these shares out to a potential short seller. This equates to a return of OVER 100% A YEAR, which is staggering. I confirmed that the fee is actually higher than that. Often times the broker will keep half of the fee. So that means this fee is likely a gross of over 200% a year- half to me and half to Schwab.
You can think what you want about short sellers, but I personally have shorted thousands of stocks over the years with my own personal money. If you can get over the stigma of helping out the competition, just realize that the fee you are receiving is potentially huge.
I don't have a list of stocks which charge huge fees like this and, believe me, I'd love to. I'd imagine it will be different from one broker to another.
If you are looking for out of the box ways to make money, and sometimes substantial money, here is one that is definitely not well known to investigate a bit further.