Interestingly enough, the hard to borrow rate is not necessarily what you will receive. Currently IB hard to borrow rate for NKLA is 967%. I received interest for about 100 shares which were lent out on Friday and over the weekend. For that IB was charging about 450%, which means I only got 225%. It still equated to nearly $200. On a hilarious side note, because your account is an "all or nothing" as far as stock yield enhancement goes, I also received about $0.04 (yes, 4 cents) for the same period on about the same number of SPY shares.
WSBers playing with fire and getting burned: NKLA hard to borrow early assignments on call spreads
- Thread starter blazespinnaker
- Start date
Borrow loan is the most opaque market in the securities industry.
Bid offers are not transparent and the firm can take a nice haircut.
Watch out on lending your dividend paying stocks. Cash in lieu is taxed at ordinary income and not at the qualified dividend rate.
Good to know. I suppose that only applies in taxable accounts and not IRA? If I'm understanding the IB knowledge base, it sounds like stocks are "usually" called back prior to dividend. That seems like effort on their part. I'd assume they just post collateral and let the end user deal with any tax implications.
Not much help talking to IB on where the giant gap is.
It sounds like they are charging 967% and that really only applies to me (or any IB customer who holds short overnight). When they lend my shares, there is some shadowy market where the current rate is around 500% (which is then split 50/50 with the owner of the shares). However, if I were short, IB would go to pay "market" rates of around 500% to borrow shares from somewhere else and then loan them to me at a their posted borrow rate of 967%.
I wanted to find out where I could see the actual market rate and not IB fee, but customer service didn't seem to understand what I was asking.
Any idea on how to locate the actual market rate?
You have to subscribe to markit or some other provider.
The stocks get called typically when the div is large. I suspect IB is talking as
If you were short. I doubt IB will call your stock for you.
Can't Brokers just "borrow" the position via CFDs and make a killing on those "hard-to-borrow" stocks? You can't tell me IB US and IB UK don't have a international risk management:
https://www.contracts-for-difference.com/Financing-charge.html
Financing is worked out as follows:
https://www.contracts-for-difference.com/Financing-charge.html
Financing is worked out as follows:
- Check out the closing price of the investment on which you hold CFDs say $20,000.
- Compute the financing charge by adding the provider’s premium (usually 2.5%) to Libor or RBA cash (say 2 per cent); total in this case would be 4.5 per cent.
- Multiply the investment amount by the financing charge: $20,000 x 4.5% = $900.
- Now dividing this by 365 returns $2.47 which is how much you stand to pay for ‘rolling’ the contract over to another day.
Although NKLA credit spreads are something which is very popular among the traders but I didn’t get any opportunity to actually trade in it. I am researching a lot these days about it and I am looking forward to investing in it too.
So you’re saying you’re low paid child from Bangladesh who posts nonsense on forums to build cred, to post spam later.