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Maybe you misunderstood my point. I'm not some sort of Fidelity fanboy, I was just pointing out that for any significant short position, 200% interest is going to cost you tens or even hundreds of dollars a day. $1 commissions is not going to make up for that. On the flip side, I'm considering switching to IB instead of Fidelity because (from what I've seen on this thread) it looks like I'd earn somewhere between 1.3x to 2x more loaning out my shares there.
I think IB expects you to conduct a certain number of trades per month, otherwise there is a monthly fee. I don't know how much of a big deal that might be for you.
The IB rates that I post are borrowing rates from what I understand. IB used to say they will pay 50% of the rate but in reality it never comes anywhere close to that. Don't know if it's because of small margin I have or something else. I asked in a ticket, they closed it giving a non-answer. I didn't press too hard.
adiggs
Well-Known Member
I looked into IB a little bit - the way I read their account requirements, you either have a minimum level of trading activity each month OR you maintain a balance north of $100k (value of account net of margin is the way I understood it). It's this latter angle that looks interesting to me because I would likely never get to their trading activity levels in any month (and probably miss their monthly trading activity level on an annual basis).
But I like low and lower trading expenses, and I dislike that I don't have the option to lend out my shares for additional income right now. Turning a non-dividend paying stock into an income stream strikes me as extraordinarily desirable.
But I like low and lower trading expenses, and I dislike that I don't have the option to lend out my shares for additional income right now. Turning a non-dividend paying stock into an income stream strikes me as extraordinarily desirable.
Rates at Fidelity:
Lend TSLA: 10.0%
Short TSLA: 21.5%, 0 shares available to short
Lend SCTY: 49.0%
Short SCTY: 82.0%, 0 shares available to short
Lend TSLA: 10.0%
Short TSLA: 21.5%, 0 shares available to short
Lend SCTY: 49.0%
Short SCTY: 82.0%, 0 shares available to short
For what it's worth @adiggs I did exactly what you're talking about a few months ago, but for slightly different reasons (was hoping to use my TSLA holdings as margin collateral so I could capture occasional market dips -- didn't realize at the time that TSLA is one of the few stocks that IB requires 100% margin and you can't use it as collateral. Whoops...).
As a data point of what to expect, I have ~925 shares of TSLA with IB and maybe 60-70 shares of SCTY. Their share lending program nets me roughly $40 a day (except for yesterday for some reason where I got $58).
This also brings up what seems like a side benefit of @jhm s recently posted trade about converting shares of TSLA to shares of SCTY: IB is paying a lot more to lenders of SCTY than lenders of TSLA, so you stand to make some additional gains there as well.
As a data point of what to expect, I have ~925 shares of TSLA with IB and maybe 60-70 shares of SCTY. Their share lending program nets me roughly $40 a day (except for yesterday for some reason where I got $58).
This also brings up what seems like a side benefit of @jhm s recently posted trade about converting shares of TSLA to shares of SCTY: IB is paying a lot more to lenders of SCTY than lenders of TSLA, so you stand to make some additional gains there as well.
adiggs
Well-Known Member
@durkie - is my understanding / reading of IB's site correct, that the trading activity level is waived above a certain account value? And do they still value you?
It's clear that IB is built around frequent traders. But 10 trades a month means I won't accumulate enough trades most years, to qualify for even a single month without an account maintenance fee. And paying them $10/month might actually be a good thing, but I'm irrationally opposed to paying fees.
That kind of lending rate, as long as I view it as a bonus instead of something I'm counting on, would be a significant help to how I arrange our finances. That's a very useful data point (and as an interesting aside, almost precisely the same number of shares of TSLA that we have - like within 5 or so). Very helpful info.
You know I honestly have no idea. I had a month or so before I transferred my Tesla shares over and I had maybe $6k sitting in the account. Don't recall any fees, but then again they don't seem to make it easy to find them either.
I think you're right about the trading activity fee going away above $100k or so. And I'm making them plenty of money by the cut they take from lending my shares.
I think you're right about the trading activity fee going away above $100k or so. And I'm making them plenty of money by the cut they take from lending my shares.
KnowLittle
Member
I was told by IB that there would be no fees if you maintained over a 100K balance. (Switched to IB due to this thread!)
*cough* I'm realizing I'm working with much larger investments than some of you. I may open an IB account anyway, but I had to do some serious digging. For the sort of trades I *normally* do (large blocks of high-value stock, and rarely), as opposed to the stuff I've been doing this year because of the market weirdness surrounding Tesla, IB actually has higher commission rates than Schwab because IB is percentage-of-value or per-share for stock trades, while Schwab is flat.
IB is clearly designed for frequent traders; their options rates appear to be clearly better under all circumstances. I'll have to think about this. It's been nice having everything consolidated at one broker, but the old rule of thumb was to have several accounts since different ones were better for different things, and it may be time for me to go back to that.
IB is clearly designed for frequent traders; their options rates appear to be clearly better under all circumstances. I'll have to think about this. It's been nice having everything consolidated at one broker, but the old rule of thumb was to have several accounts since different ones were better for different things, and it may be time for me to go back to that.
Yonki,
I think you were on to something here. The returns of short selling hedge funds are as spectacularly awful as the short selling mutual funds you highlighted. For example, in a Bloomberg article from last year, they showed how horribly short selling hedge funds performed relative to market indices and other hedge funds, with a -69% return over the previous six years:
And this is no fluke -- dedicated short selling hedge funds have returned a horrific -5.39 percent per year lifetime to date according to the Credit Suisse Short-Dedicated Bias Index:
Credit Suisse Hedge Fund Index
So even among hedge funds -- which underperform as a class -- short-selling hedge funds are an outlier with performance almost 10 percent per year lower than the next worst performing class of hedge fund.
I think all the noise short sellering hedge funds make around stocks like Tesla should probably be considered a marketing campaign designed to attract investors while distracting them from the funds' historical track record of burning their investors' cash at alarming rates.
Someone pointed out that those funds may only be used sporadically, when you think the indexes are going to take a big hit. That would make sense if they had assets close to $0 most of the time, but QQQ has assets of $439.19M, so it sure seems like some doomsayers are in it for the long haul. Of course, eventually they'll be right. But like the shorts paying 20% and 80% (sometimes 200%) to short TSLA and SCTY, they could easily lose their shirts before then..
I have not taken a hard look at the mutual funds you identified, but I don't think it is the case that Short-Bias Hedge Funds are short-term investments as was suggested was the case for the mutual funds you described.
The broader point is that both mutual funds and hedge funds that focus on short selling are unbelievably bad investments. You are almost better off giving your money to Bernie Madoff ....
That's not to say that there may not be specific short investments that are successful, but on average it appears that despite all the chest pounding from short sellers both short oriented mutual funds and short oriented hedge funds are absolutely atrocious investments. The worst I can recall seeing of any major asset class.
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