Fidelity is still paying 1.5% to lenders, but a three-share odd lot of mine was just lent out. Indicates to me that at a minimum, shorts are not covering during this rally. Otherwise, Fidelity would not have bothered with such a small odd lot.
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Fidelity is still paying 1.5% to lenders, but a three-share odd lot of mine was just lent out. Indicates to me that at a minimum, shorts are not covering during this rally. Otherwise, Fidelity would not have bothered with such a small odd lot.
Offtopic: what does you broker do if the shared can't be returned because the person going short defaults? I know in theory they need to be covered by some other shares but what if the price rises over night more than anyone expects? Just an odd question...
Seems very weird if there is not much covering going on during the recent run-up. Dangerous, even. Does anyone have more data to corroborate this?
I don't think you can conclude there was no covering, especially in the face of high total volume. I think some shorts were covering, while others were thinking "Gee, I was short before, now the price is even higher, it must go down soon... short some more!".Seems very weird if there is not much covering going on during the recent run-up. Dangerous, even. Does anyone have more data to corroborate this?
I don't think you can conclude there was no covering, especially in the face of high total volume. I think some shorts were covering, while others were thinking "Gee, I was short before, now the price is even higher, it must go down soon... short some more!".
99.999999% of the time, the broker returns their own shares when the person / entity that borrowed the shares isn't able to perform.
But in that other fraction of a %, the person / entity that was short has also deposited with a 4th party, an amount of cash equal to either 100 or 102% of yesterday's closing price of the stock. So "unable to perform" on the part of the short seller means the underlying stock has move hard against them TODAY, but they had enough cash to buy back the stock at yesterday's close, as evidenced by the fact that they have that amount on deposit and out of their direct control.
Also not in the direct control of the broker.
As a lender of shares, my counter party isn't the short seller - it's my broker. So when I ask for my shares back and the short seller can't provide them, I DON'T CARE. And neither does my broker - we both know that its the broker that borrowed my shares and its their livelihood and existence on the line. That's why they return their own shares
But if they can't, then they go into default, and there's going to be a whole pile of lawyers getting rich on the bankruptcy. In the meanwhile, in lieu of my stock back, I get the 100 or 102% of cash that is being held on deposit with me as the beneficiary in the event that my counterparty - the broker - defaults on my loan to them and can't return my shares. And its in that form so I get my cash value (not stock) back immediately and don't need to wait through bankruptcy proceedings to be made whole.
It's also why if you're short the stock, you keep a whole bunch more cash in your margin account than you need today to fully fund the cash on deposit with the 4th party. And why your broker will call you, but not necessarily wait very long for you to call them back, in the event that the underlying stock moves heavily against you and they issue a margin call.
Because the broker is also out on that bankrupty limb with you. They don't like that limb having any bounce in it
Most of my shares have been lent out for the last ~2 months, but I have 50 shares that just refuse to be lent out. Also just saw the 1.375% rate drop at Fidelity.For the first time in a while, I am now fully lent out at Fidelity.
Edit: But now only being paid 1.375%. Odd.
Is there one that seems to lend out more consistently and at a higher rate than the other? I generally try not to keep all my eggs in one basket but considering the big difference between Etrade and the others it sounds smart to switch brokers, Etrade was about .4% last time I looked.According to a third-party website (courtesy of @ValueAnalyst on Twitter), it appears lending rates at IB edged up to 2.7% from 2.6% this afternoon. So seems to be a mixed bag between Fidelity and IB. https://iborrowdesk.com/report/tsla
Is there one that seems to lend out more consistently and at a higher rate than the other? I generally try not to keep all my eggs in one basket but considering the big difference between Etrade and the others it sounds smart to switch brokers, Etrade was about .4% last time I looked.
It depends on your account. If you have margin/options trading, no, you don't know and you don't make anything if they do. But in a more basic account I'm pretty sure they have to tell you, at least.Sorry to ask this...
I’m with Fidelity. Does Fidelity notify me or ask me if they lend out any / all of my TSLA shares to a short seller?
Thank you!
Sorry to ask this...
I’m with Fidelity. Does Fidelity notify me or ask me if they lend out any / all of my TSLA shares to a short seller?
Thank you!