Definitely it is the cost to borrow, it will usually end up costing you more money than you could make, unless your broker somehow has cheap shares to short that no one else does which doesn't make sense to me because someone would be losing money somewhere. These could be helpful if you held some of these beat down shares long and you could 'lend' them out using the SSF to capture the high borrow rate to recoup some of your losses if you planned on holding on to these companies for the long haul.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
SSF .. why the free money?
- Thread starter empee
- Start date
Definitely it is the cost to borrow, it will usually end up costing you more money than you could make, unless your broker somehow has cheap shares to short that no one else does which doesn't make sense to me because someone would be losing money somewhere. These could be helpful if you held some of these beat down shares long and you could 'lend' them out using the SSF to capture the high borrow rate to recoup some of your losses if you planned on holding on to these companies for the long haul.
Quote from Lucrum:
I've done some of these a number of months ago. Both long stock/short SSF and short stock/long SSF.
It can be difficult to get a favorable entry price on the SSF leg due to the wide inside markets. It's probably best to do the SSF leg first during low volatility then the stock leg. Sometimes splitting the bid/ask works other times you have to go almost to the bid/ask to get a SSF fill. Or maybe some sort of automated program might work better than manual entries. Margin interest, if any, will diminish the return. I kept asking myself if there wasn't something I was missing, such as a risk I hadn't thought of, maybe there is and I just overlooked it. Of course it's also rather boring, like waiting around for an option premium to wither away.
If you do look at it further and you use IB set up your own EFP interest page on TWS. The one on IB's web site doesn't up date in real time.
I can not click on that link you gave until tonight. So you are saying that you were able to find long stock/short SSF opportunities where the stock price was > than the SSF price? I would not expect you to divulge specific details, but knowing that there is would be very hopeful. I would much rather try this scenario than shorting a stock and going long the SSF because it could potentially be out of your hands. I have had borrowed shares called back on me before and I was forced to cover prematurely.
Quote from scriabinop23:
Hmmm.. interested in this. Look at GM April for 1.65, GM Sep 1.22. Is that a risk free arb?
As long as you can borrow the shares that long and the ask with those prices you quoted has enough contracts for you to get, without you having to chase it, than its an extremely high percentage trade. Remember if the profit margin is like a quarter as in the Aprils, there is not much room for slippage. You would really need to put this spread on in seconds.
If you go to onechicago.com, there is a list of EFP's that would seemingly give huge yields. But when I checked the cost to short these stocks with IB, they also had huge costs to short. That makes sense as there is no free lunch with so many arb players.
So if you sell a stock and buy the SSF and think you are making a really high yield, you had better check how much your broker is charging you for the short. With IB, this can be somewhat tricky. Good luck!
So if you sell a stock and buy the SSF and think you are making a really high yield, you had better check how much your broker is charging you for the short. With IB, this can be somewhat tricky. Good luck!
found it, thanksQuote from dcvtss:
Log into account management and go to tools. There is a short stock availability tool that tells you recent borrowing costs as well.
but Iâm confused a bit⦠for example, GM have âCurrent Indicative Rateâ â (-119.00)⦠Iâll appreciate if someone could explain what does it mean and how I can calculate the cost of borrowing using this numbersâ¦
Quote from heech:
Can someone speak to the tax considerations here?
I've heard one of the advantages of trading futures, in general, is the favorable division of long/short-term cap gains.
Does that apply to SSFs?
I looked into this a couple years ago. The answer is that SSF's do NOT get the favorable 60/40 tax treatment that 1256 contracts get.