Shld 25d R/r

dmo · Apr 24, 2009

Note too that if you go to www.interactivebrokers.com Individuals > Trading > Shortable stocks > Country, then look up the stock, you will get the number of shares available for shorting and the exchanges - but no indicative rate. Why not put it here, where customers are specifically looking for information pertaining to shorting a particular stock? That's where I looked before shorting Sears.

It's simply not credible to pretend that IB is making a good-faith effort to inform customers of the rate they will pay.

If I want to borrow money or shares at 100% interest, I don't need or want the government to interfere. All I want is information so I can make an informed decision. Obviously IB prefers that I not have that info.

nravo · Apr 24, 2009

Quote from dmo:

Note too that if you go to www.interactivebrokers.com Individuals > Trading > Shortable stocks > Country, then look up the stock, you will get the number of shares available for shorting and the exchanges - but no indicative rate. Why not put it here, where customers are specifically looking for information pertaining to shorting a particular stock? That's where I looked before shorting Sears.

It's simply not credible to pretend that IB is making a good-faith effort to inform customers of the rate they will pay.

If I want to borrow money or shares at 100% interest, I don't need or want the government to interfere. All I want is information so I can make an informed decision. Obviously IB prefers that I not have that info.

Trust me, you want the government to intervene (and prohibit) if you borrow at 100%, because then clearly you're not intelligent, educated or mentally competent enough to give an informed consent. It's called predatory lending. A stupid person will do stupid things even when they are disclosed. You could probably disclose I get to cut out your kidney if you don't pay on time, and people, in their irrational compulsion to buy stuff they don't need, will sign the paper.

If if you don't want government regulation, I assume you don't want government regulation collection of interest and debt laws and bankruptcy laws. Creditors can just take what they want automatically, by force if necessary, and throw you in debtor's prison.

dmo · Apr 24, 2009

Quote from nravo:

Trust me, you want the government to intervene (and prohibit) if you borrow at 100%, because then clearly you're not intelligent, educated or mentally competent enough to give an informed consent. It's called predatory lending. A stupid person will do stupid things even when they are disclosed. You could probably disclose I get to cut out your kidney if you don't pay on time, and people, in their irrational compulsion to buy stuff they don't need, will sign the paper.

If if you don't want government regulation, I assume you don't want government regulation collection of interest and debt laws and bankruptcy laws. Creditors can just take what they want automatically, by force if necessary, and throw you in debtor's prison.

Maybe it's reasonable for the government to protect the poor and uneducated against their own poor borrowing decisions. Hopefully we're a little more sophisticated crowd here.

Actually, the thing I like most about IB is the lack of paternalism. While companies like Schwab restrict what you can do in the name of protecting you against yourself, IB lets you take any risk you want with your own money. I much prefer working with sharp knives.

So personally, I'd be satisfied if the government required good-faith disclosure of borrowing terms. This whole thread demonstrates that it falls short on even that modest standard.

spindr0 · Apr 25, 2009

Quote from dmo:

Note too that if you go to www.interactivebrokers.com Individuals > Trading > Shortable stocks > Country, then look up the stock, you will get the number of shares available for shorting and the exchanges - but no indicative rate. Why not put it here, where customers are specifically looking for information pertaining to shorting a particular stock? That's where I looked before shorting Sears. It's simply not credible to pretend that IB is making a good-faith effort to inform customers of the rate they will pay.

DMO,

IB does provide the info in the Account Management section as you previously posted as well as a page that explains the info that they provide (see link below). However, I agree with you that it would be much more transparent if they put it at the Shortable Stocks page at their web site as well as in/at the "Shortable" column in TWS as Newguy suggested.

http://institutions.interactivebrok...PDF-Short_Stock_Avail_Tool.php?ib_entity=inst

spindr0 · Apr 25, 2009

Trust me, you want the government to intervene (and prohibit) if you borrow at 100%, because then clearly you're not intelligent, educated or mentally competent enough to give an informed consent. It's called predatory lending. A stupid person will do stupid things even when they are disclosed. You could probably disclose I get to cut out your kidney if you don't pay on time, and people, in their irrational compulsion to buy stuff they don't need, will sign the paper.

Your hyperbole is amusing but it's not relevant to reality (mafia lending, cutting off hands, cutting out kidneys). Charging an indicative rate on hard to borrow stocks isn't predatory lending. No one is forcing you to borrow and short the stock and using credit card interest rates for people who have financial difficulties is a bad analogy .

While my knowledge of the SLB market is limited, I am aware that the cost of borrwing has risen over the past year (from my own trading as well as some articles that I have read). Not only has the rate doubled over the past year for S&P 500 stocks but there are more now than ever with negative rebates which means your broker pays to borrow them rather than getting a fee for participating in the short sell transaction. I think C and GM are currently over 100% and that rate is a reflection of the risk that your broker has since his collateralization is over 100%.

rluser · Apr 25, 2009

Quote from nravo:

Trust me, you want the government to intervene (and prohibit) if you borrow at 100%, because then clearly you're not intelligent, educated or mentally competent enough to give an informed consent. It's called predatory lending.

Nonsense. Occasions exist where that is prudent, informed, and lucrative. Not each need be present to argue against usary laws.

gkishot · May 16, 2009

My question is if IB charges for borrowing stocks why then it pays nothing to those who hold long positions?

dagnyt · May 16, 2009

Quote from gkishot:

My question is if IB charges for borrowing stocks why then it pays nothing to those who hold long positions?

You don't need interest. This pays much more.

If you own long stock, you can buy the calls and sell the puts and sell that stock. The reverse conversion is priced to lock in a profit in many of these - difficult to borrow -stocks. Because you don't have to short the stock to make the sale, it is free money for you (with pin risk).

Mark
http://blog.mdwoptions.com/

heech · May 17, 2009

Quote from gkishot:

My question is if IB charges for borrowing stocks why then it pays nothing to those who hold long positions?

If you're long one of these stocks, and expect to hold for 30+ days... you can take advantage of these borrowing rates by doing an EFP into a single-stock future:

http://www.interactivebrokers.com/en/trading/pdfhighlights/PDF-ExchPhysical.php

This is *exactly* why the single-stock future exists, and it's too bad it's not more liquid/widely used. You can "see" the borrow cost (and lending profit) precisely by looking at the discount that the SFF is trading to the spot price.

If you're holding C long right now, and planning to hold it at least through June 19th, for example... you can "make" an extra $0.40 per share by selling your stock (~$3.50) and buying the June future (~$3.10).

And heck, I guess people could even speculate on borrowing cost... trade the spread between the spot stock price and the future?

gkishot · May 17, 2009

Quote from dagnyt:

You don't need interest. This pays much more.

If you own long stock, you can buy the calls and sell the puts and sell that stock. The reverse conversion is priced to lock in a profit in many of these - difficult to borrow -stocks. Because you don't have to short the stock to make the sale, it is free money for you (with pin risk).

Mark
http://blog.mdwoptions.com/

Hi Mark,

1. My point was not about whether I need it or not but about fairness of having charged short positions and not paying interest on long positions.

2. Regarding your suggestion: wouldn't be broker charging interest on the short stock so you end up having no profit at all? By the way I checked with ToS and I found only one stock ( SHLD ) that has it's combo sold at significant discount to it's fair value. Do you have any other examples of hard to borrow stock like that?