Tracking short interest

[Yonki]

I found out that these interest rates are adjusted "by hand" by particular people, so they are going to have a certain amount of lag time. If shares become hard to borrow, expect a week's delay before the interest rates go up to attract more lenders.

I can imagine that they are adjusted by hand, but why would that take a week? The amount of money to be made by the lenders and the brokerage is amazing. Here are the latest Fidelity rates (they've been unchanged for several weeks):

Lend TSLA: 4.25%
Borrow TSLA: 7.000% ("estimated" - I assume "estimated" because they don't know what it will be over time)
Lend SCTY: 45%
Borrow SCTY: 67.500% ("estimated")

They report 0 shares available to short for both stocks.

A few more months like this and my SCTY could drop to $0 and I'd still come out ahead. Insane.

 

[MikeC]

Anyone know why short interest hasn't posted yet?

Edit: Maybe this? Buffett's Business Wire Says Releases Halted After Power Failure

 

[Chickenlittle]

Anyone know why short interest hasn't posted yet?

Edit: Maybe this? Buffett's Business Wire Says Releases Halted After Power Failure

No not same organization. Have never seen this before

 

[neroden]

I can imagine that they are adjusted by hand, but why would that take a week?

They'll increase the rate charged to the borrowers immediately, and wait as long as possible to raise the rate paid to the lenders. Capiche? They're trying to raise the spread.

 

[MikeC]

How does one go about shorting anyway? Do you have to call in and request to do it, or is there a way to access it online?

My brokerage said they weren't allowed to provide me a list of stocks that were hard to borrow due to some regulation, but I'm wondering if I could find out by seeing what the cost to short a given stock is.

 

[hobbes]

Article including historical graph of short interest including latest data point:
The Tesla Motors Short Squeeze Still Hasn't Happened -- The Motley Fool

 

[Yonki]

How does one go about shorting anyway? Do you have to call in and request to do it, or is there a way to access it online?

You can short with most (all?) online brokerages, though you need collateral, a margin account, and you may have to sign a document stating (paraphrased a little) "I understand that shorting stocks could decimate my life's savings and leave me penniless in the street". If you contact your broker I'm sure they'll tell you what you need to do to enable it.

My brokerage said they weren't allowed to provide me a list of stocks that were hard to borrow due to some regulation, but I'm wondering if I could find out by seeing what the cost to short a given stock is.

That's how I do it - go into Fidelity and start filling in the data for a short sale, it then tells me how many shares they have and what the approximate annual interest rate is.

Speaking of which, Tesla's rates at Fidelity went down today for the first time in a month or two. 6% to borrow (was 7%), 3.75% to loan (was 4.25%). 115,379 shares available to short.

 

[Yonki]

They'll increase the rate charged to the borrowers immediately, and wait as long as possible to raise the rate paid to the lenders. Capiche? They're trying to raise the spread.

Capiche. I'd interpreted what you said ("If shares become hard to borrow, expect a week's delay before the interest rates go up to attract more lenders") as meaning that delaying itself would somehow attract more lenders.

English...

 

[Hogfighter]

I can imagine that they are adjusted by hand, but why would that take a week? The amount of money to be made by the lenders and the brokerage is amazing. Here are the latest Fidelity rates (they've been unchanged for several weeks):

Lend TSLA: 4.25%
Borrow TSLA: 7.000% ("estimated" - I assume "estimated" because they don't know what it will be over time)
Lend SCTY: 45%
Borrow SCTY: 67.500% ("estimated")

They report 0 shares available to short for both stocks.

A few more months like this and my SCTY could drop to $0 and I'd still come out ahead. Insane.

How do you get paid for allowing your stock to be shorted?

 

[Yonki]

How do you get paid for allowing your stock to be shorted?

I honestly still don't understand the exact accounting (i.e. why the shares need to be taken from my account and replaced with equivalent cash, adjusted every day as the stock price changes). But basically you can't have more stock shorted than there are shares available. So for every share shorted there has to be a corresponding real share that the short can cover with. I'm letting shorts use my shares, and since there aren't many shares available, Fidelity gets to charge them significant interest for the privilege and I get a large portion of that interest.

And I'm going to enjoy it for as long as it lasts... These suicidal, tenacious shorts have basically turned TSLA into a dividend-paying stock (and SCTY into a monster cash generator).

 

[ggr]

I honestly still don't understand the exact accounting (i.e. why the shares need to be taken from my account and replaced with equivalent cash, adjusted every day as the stock price changes). But basically you can't have more stock shorted than there are shares available. So for every share shorted there has to be a corresponding real share that the short can cover with. I'm letting shorts use my shares, and since there aren't many shares available, Fidelity gets to charge them significant interest for the privilege and I get a large portion of that interest.

And I'm going to enjoy it for as long as it lasts... These suicidal, tenacious shorts have basically turned TSLA into a dividend-paying stock (and SCTY into a monster cash generator).

Yes, there can be more shares shorted than actually exist. Person A owns shares, which are borrowed by S and sold to B. Now T borrows B's shares, and sells them to C. Both S and T are short that number of shares, but only one lot of such shares actually exists.

 

[TheTalkingMule]

3/31 short interest numbers are now on the NASDAQ site and are list SCTY at 23.7M, even lower than the last report. How do we reconcile that with the insane rates being paid to short this stock today? Costs to short SCTY have to be near an all-time high, perhaps short interest has ballooned since 3/31?

 

[Yonki]

Yes, there can be more shares shorted than actually exist. Person A owns shares, which are borrowed by S and sold to B. Now T borrows B's shares, and sells them to C. Both S and T are short that number of shares, but only one lot of such shares actually exists.

So why do the shares ever get hard to short? What you're describing seems like there's no limit to how many shares could be shorted...

 

[MikeC]

I honestly still don't understand the exact accounting (i.e. why the shares need to be taken from my account and replaced with equivalent cash, adjusted every day as the stock price changes).

The reason is that if you lend your shares to Fidelity and Fidelity goes bankrupt, you could lose your shares. So they give you cash collateral, from an independent bank, to protect you from the rare chance of that happening.

 

[ggr]

So why do the shares ever get hard to short? What you're describing seems like there's no limit to how many shares could be shorted...

The owner of the shares doesn't have to lend them out. In the example above, C might not have a margin account, or might write a covered call against them, or might just not want to lend them out. Most institutions, and Elon and other insiders, won't lend their shares. You're right that in theory it could be infinite, but in practice a short squeeze is inevitable as soon as someone big notices and buys everything in sight. This is essentially what happened with Porsche/VW way back when.

 

[Yonki]

Thanks Mike and ggr - that ties up the loose ends in my understanding.

 

[MikeC]

Schwab rate for lending TSLA decreased today to 2.5% from 3%.

 

[BobSk]

I can imagine that they are adjusted by hand, but why would that take a week? The amount of money to be made by the lenders and the brokerage is amazing. Here are the latest Fidelity rates (they've been unchanged for several weeks):

Lend TSLA: 4.25%
Borrow TSLA: 7.000% ("estimated" - I assume "estimated" because they don't know what it will be over time)
Lend SCTY: 45%
Borrow SCTY: 67.500% ("estimated")

They report 0 shares available to short for both stocks.

A few more months like this and my SCTY could drop to $0 and I'd still come out ahead. Insane.

Buy SCTY and lend to the shorts.

 

[Rarity]

A hearty thanks to all who have discussed the loaning of securities. I moved my TSLA and SCTY over to Fidelity and they promptly put my stock out to lend.

Lend TSLA: 2.75%
Lend SCTY: 45%

The Bloomberg article about the lawsuit between Fidelity and Peter Deutsch was very good food for thought.

 

[Yonki]

: The Bloomberg article about the lawsuit between Fidelity and Peter Deutsch was very good food for thought.

I agree, just not sure what that thought ultimately is. I don't feel like my money is at any more risk than if I wasn't participating, but it sure doesn't paint Fidelity in the greatest light...