Tracking short interest

[adiggs]

You have to apply to join the Fully Paid Lending program, there are certain account minimums to meet in order to qualify in the first place.

Correct - if you're in a non-margin account, then your shares are fully paid / owned by you, and Fidelity does not have access to lend them out. In which case your shares are not lent out, period.

If you're in a margin account, then the simple and easy assumption is that they're lent out if your broker can earn something for them. Just think of the stuff you own in a margin account as being stuff you jointly own with your broker, and part of the deal you make with the broker so you can own stuff in a margin account, is that the broker can lend out the shares and keep all of the interest from doing so.

It's a big reason why most people, for most stock issues, never get their shares lent out - there are too many shares the brokers can lend out without asking.


For Fidelity, you need to join the Fully Paid Lending Program. Think "accredited investor" and you're heading in the right direction. I've read that for some people, they get a call from Fidelity inviting them to join the program. If you read their website, then it'll sound like the program is by invitation. They never called me - I called them and asked them to invite me into the program. You want the phone number for Fidelity Capital Management - call them up and ask them to invite you.

Start by reading all of the disclosures about how the Fully Paid Lending Program works (I'd read the stuff before I bothered calling Fidelity). The obvious change that will occur while your shares are lent out are:
1) you will earn daily interest on those shares (it's like having money in a CD!)
2) you won't get the opportunity to vote your shares on issues that arise (or attend the shareholders meeting, etc..). You can recover these rights by requesting your shares back ahead of as-of dates for votes etc..


The reason you're reading that stuff is you want to understand and be comfortable with the idea that you will have lent out your TSLA shares, and believe that even a 2008 style market melt down shouldn't risk your ownership of the shares. And most importantly, why. Because like any loan, one outcome from lending somebody money is they don't pay it back and you're left with nothing. This isn't an unsecured loan.

But don't take my word for it - I'm a random generator of text on the Internet.

EDIT: Worth adding - the market meltdown you want to be protected from is actually a melt UP If Tesla jumps 33% tomorrow, you have 3 counter parties to your lent out shares, only one of whom needs to perform so that you receive cash value equal to yesterday's closing price (in this circumstance, by lending out the shares, if the other 2 counter parties - the short seller AND your broker fail to perform and return your shares), then you get cash back and miss out on the 33% jump in the stock price in a single day. And a 33% jump in a single day probably isn't enough to stop cause both of those parties to default (you know your broker is well geared to avoid default - bankruptcy is bad for a financial businesses business).

You're reading the program materials to better understand what safeguards the short seller (ultimate borrower of your shares) is putting up, and what safeguards your broker has to protect themselves from the short seller defaulting. So that you know what safeguards YOU have to protect yourself from your broker defaulting.

Good luck

 

[neroden]

FWIW, if people *want* to squeeze short sellers and let TSLA rise to a more appropriate price prior to the date when the holders of the convertible bonds have to decide whether to convert or not, it would be wise to recall shares from share lending programs, and pay off margin loans in margin accounts, in January 2019 (or earlier). I did the calendar math in another thread, adding the various possible delays together, just for fun.

 

[Chickenlittle]

FWIW, if people *want* to squeeze short sellers and let TSLA rise to a more appropriate price prior to the date when the holders of the convertible bonds have to decide whether to convert or not, it would be wise to recall shares from share lending programs, and pay off margin loans in margin accounts, in January 2019 (or earlier). I did the calendar math in another thread, adding the various possible delays together, just for fun.

Already recalled my first 1000. Interesting it came from 4 different borrowers. Even with the drop in interest rate paid and decrease in shares still loaned my interest amount stable. Plan to continue current withdrawals on weekly basis tagged to interest amount the same. So larger stock raises, higher recalls

 

[Unpilot]

Already recalled my first 1000. Interesting it came from 4 different borrowers. Even with the drop in interest rate paid and decrease in shares still loaned my interest amount stable. Plan to continue current withdrawals on weekly basis tagged to interest amount the same. So larger stock raises, higher recalls

1000 shares? and more to recall? Count me jealous.

 

[ValueAnalyst]

IBorrow Desk

Shorts have finally started to tiptoe quietly to the exit: Available shares to short at one broker rose above one million this morning for the first time since January 4, 2018, and the fee rate ticked down to 2.5%.

 

[MP3Mike]

Short update from Ihor: Ihor Dusaniwsky on Twitter

$TSLA short interest is $13.1 billion (record levels due to June's 25% stock price rally), 36.8 million shares shorted, 29% of the float. 2.26 mm shares were covered in June. @Tesla shorts are down $2.7 billion in mark-to-market losses in June, $2.1 billion year-to-date.

 

[EinSV]

Short update from Ihor: Ihor Dusaniwsky on Twitter

Love that chart -- short low, cover high, yet again.

TSLA shorts are so dependable -- like clockwork.

 

[AWDtsla]

Maybe this deserves it's own thread, but since we're probably nearing that time:

1. Is there a way for a retail investor to track short activity near real time?
2. Does anyone have a model for how high the stock price could go if/when a real short squeeze happens?
3. Any advice for retail investors on how to play the squeeze? Even for longs, it doesn't make much sense to hold onto a stock that's been inflated to 10 times of an already extravagant valuation, and you're pretty much guaranteed the price will fall well below your after-tax gains, in days or weeks.

 

[EinSV]

Maybe this deserves it's own thread, but since we're probably nearing that time:

1. Is there a way for a retail investor to track short activity near real time?
2. Does anyone have a model for how high the stock price could go if/when a real short squeeze happens?
3. Any advice for retail investors on how to play the squeeze? Even for longs, it doesn't make much sense to hold onto a stock that's been inflated to 10 times of an already extravagant valuation, and you're pretty much guaranteed the price will fall well below your after-tax gains, in days or weeks.

Re your question number 1 -- I think Ihor Dusaniwsky, Markit and others may have subscription-based services (no idea what the cost would be) but am not aware of anything that is not subscription based. We try to crowd source anecdotal data as best we can in this thread.

Re your question numbers 2 and 3, this thread may be what you are looking for: Short Squeeze Strategy I personally remain skeptical we'll see a true short squeeze, but you never know.

 

[Boomer19]

I noticed a lot of questions on here, maybe this will help some of you
Key Points About Regulation SHO
Particular attention to the reg sho rules 200-204 that require brokers to categorize their orders accurately, reasonably locate borrows before allowing shorts (there are non-shortable securities lists as well), pricing their buy-ins, and the process of warning, and then executing their buy ins to shorts/counterparties

Question to all;
What’s worth more? Loaning your shares out at current rates, then splitting the interest with broker...
or recalling your shares from the loaning pool (assuming you’re fully seg’d, and not using margin)?

One can re-enter the loaning pool whenever they want, correct?

It just seems 100 here, 100 there, would add up.. a few ticks higher more than makes up for lost interest from not loaning. I wonder what people collectively think, because I see a lot of people talking about loaning, and also wondering how to play short squeeze..

Seems to me if you’re tired of the circus the shorts have created over the last 3-4 months,
you’d band together and just create one, like neroden said

 

[Boomer19]

Maybe this deserves it's own thread, but since we're probably nearing that time:

1. Is there a way for a retail investor to track short activity near real time?
2. Does anyone have a model for how high the stock price could go if/when a real short squeeze happens?
3. Any advice for retail investors on how to play the squeeze? Even for longs, it doesn't make much sense to hold onto a stock that's been inflated to 10 times of an already extravagant valuation, and you're pretty much guaranteed the price will fall well below your after-tax gains, in days or weeks.

1) no, finra requires brokers to report to the exchange, then exchange reports as follows (twice a month; ~ 12 day lag) NASDAQ Short Interest Publication Schedule

2) variable. You can crunch data in a number of ways. Here’s Tesla history
https://www.nasdaq.com/symbol/tsla/short-interest
You can add historical pricing to try and extrapolate trends. Maybe even get your hands on the borrow rate history (because the rates variable as well)

3) I don’t give trading advice. But the mechanics of stock loan say; when the amount of shares available to be borrowed are down, the shorts can’t stay in the drivers seat. Also, If you're worried about short-term with Tesla, then I imagine it’s possible you were flushed out by Friday, and this is all for not anyway. ( I hope not!!! )

 

[MikeC]

I noticed a lot of questions on here, maybe this will help some of you
Key Points About Regulation SHO
Particular attention to the reg sho rules 200-204 that require brokers to categorize their orders accurately, reasonably locate borrows before allowing shorts (there are non-shortable securities lists as well), pricing their buy-ins, and the process of warning, and then executing their buy ins to shorts/counterparties

Question to all;
What’s worth more? Loaning your shares out at current rates, then splitting the interest with broker...
or recalling your shares from the loaning pool (assuming you’re fully seg’d, and not using margin)?

One can re-enter the loaning pool whenever they want, correct?

It just seems 100 here, 100 there, would add up.. a few ticks higher more than makes up for lost interest from not loaning. I wonder what people collectively think, because I see a lot of people talking about loaning, and also wondering how to play short squeeze..

Seems to me if you’re tired of the circus the shorts have created over the last 3-4 months,
you’d band together and just create one, like neroden said

According to Ihor, the vast majority of lending is institutional. Retail investors are a drop in the bucket, even before you get into the prisoner’s dilemma aspect of coordinating financial moves with strangers on the internet. I think the best way to contribute is to take the shorts’ money and buy more TSLA with it.

 

[Boomer19]

According to Ihor, the vast majority of lending is institutional. Retail investors are a drop in the bucket, even before you get into the prisoner’s dilemma aspect of coordinating financial moves with strangers on the internet. I think the best way to contribute is to take the shorts’ money and buy more TSLA with it.

- retail are drop in bucket
- prisoners dilemma
oh, agreed for sure!!

but there’s a ton of people worried about their loans and how many of their shares are being lent out one day versus another day, and it’s also trivial numbers in most cases. it’s like, why bother?

i also posted this 6/14 in response to a bunch of posts i saw about sec lending (note some of my posts are responses to many articles i’ve seen, not just the individual i respond to).

that’s one way, but highly unlikely.
the loan use rate of long tesla shares is about 85% (long shares used to loan out to shorts). if a big institution decided to recall their shares from the street that would be more likely to cause a more impactful squeeze. this is also unlikely because a big broker like fidelity, for example, or even whoever is the custodian for tencent (probably a name brand) wouldn’t do so, as that would strain relationships with its street counterparts. they may recall loaned shares leading up to an important record date ( like an important proxy vote- because they’d need to HOLD shares at the depository in their custodian account in order to vote on such shares - or even receive a full dividend, instead of PIL payment in lieu which is subeckt to full withholding tax) but again this is all speculation. just an example of that scenario. further, elon’s shares are probably not eligible to be loaned bc of conflict (although i’m not sure about this). his purchases are also done by third party executor on a time schedule. so your point about this not being the last one could be correct. he would have scheduled batches of market purchases within timing that regulation dictates with this executor prior to the first execution. the point being, it’s not just him sitting at home on his trader workstation executing trades or from his phone at GF lol. therefore the articles claiming he’s manipulatiating of the market is kinda BS...true he’s buying and def telling the market that’ he’s confident, but he’s not doing it on the day, or probably not even the day before

i guess the point is, there’s a lot of misguided questions that stem from not exactly knowing how certain aspects of the system work. i sure have a lot of them too. but that’s also why almost of us are here, to learn

 

[Oil4AsphaultOnly]

- retail are drop in bucket
- prisoners dilemma
oh, agreed for sure!!

but there’s a ton of people worried about their loans and how many of their shares are being lent out one day versus another day, and it’s also trivial numbers in most cases. it’s like, why bother?

i also posted this 6/14 in response to a bunch of posts i saw about sec lending (note some of my posts are responses to many articles i’ve seen, not just the individual i respond to).




i guess the point is, there’s a lot of misguided questions that stem from not exactly knowing how certain aspects of the system work. i sure have a lot of them too. but that’s also why almost of us are here, to learn

I think there's too much hand wringing over this.

For retail shareholders, the lending of shares is simply a way to make extra money, WHILE retaining ownership of their TSLA shares (I do this in my IRA cash account, because I don't want the additional risk of bumping it into a margin account and trading options with it).

All the concern about being left holding nothing after lending out their shares is FUD (in the literal definition, not as an attack against the brokers), and has no bearing on the wisdom of participating in the share lending.

Bottom line, if you're a retail investor, and have enough shares to be asked by your broker to participate in the share lending program, then you should do it. It's essentially free money (~0.1% per month though, so peanuts). You'll get better returns selling OTM calls against your holdings though, so there's that to consider.

 

[Boomer19]

I think there's too much hand wringing over this.

For retail shareholders, the lending of shares is simply a way to make extra money, WHILE retaining ownership of their TSLA shares (I do this in my IRA cash account, because I don't want the additional risk of bumping it into a margin account and trading options with it).

All the concern about being left holding nothing after lending out their shares is FUD (in the literal definition, not as an attack against the brokers), and has no bearing on the wisdom of participating in the share lending.

Bottom line, if you're a retail investor, and have enough shares to be asked by your broker to participate in the share lending program, then you should do it. It's essentially free money (~0.1% per month though, so peanuts). You'll get better returns selling OTM calls against your holdings though, so there's that to consider.

exactly. good post.

 

[neroden]

Although it is very unlikely that your broker would default on you and fail to return your lent shares, it *is possible*, and I would not criticize anyone concerned about this possibility. It is only really plausible in an extreme, sudden VW-like short squeeze, which I don't think is likely (I expect a more orderly short-covering rally than that).

As for selling OTM calls, you have a pretty high chance of getting run over if the stock price runs up even in an orderly fashion; I don't do this in a stock I want to keep long term with a high chance of rising fast.

 

[ValueAnalyst]

IBorrow Desk

Pressure continues to come off shorts: fee rate now down to 2.0% with a healthy number of shares available to borrow at IB.

I interpret this as shorts getting ready to attack whatever Elon has up his sleeve. Whatever it is, we are in for an exciting few weeks.

 

[MikeC]

And Fidelity down to 1.125%

 

[neroden]

Let's see if I can get my shares lent out at all; finally got them to Fidelity today. Even half a percent would be real money for me.

 

[Rarity]

Let's see if I can get my shares lent out at all; finally got them to Fidelity today. Even half a percent would be real money for me.

Now down to 1%. After a certain point, they just stop paying, because they have plenty of other sources for shares.