Mario Kadastik
Active Member
Wow, the shares available to short has really expanded. On my IB right now:
TSLA: 144k to short 12.8% rate
SCTY: 718k to short, 11.9% rate (!!)
TSLA: 144k to short 12.8% rate
SCTY: 718k to short, 11.9% rate (!!)
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So short interest is down and SP is going down.
Institutional selling perhaps.
adiggs
Well-Known Member
MitchJi
Trying to learn kindness, patience & forgiveness
Or just expansion of shorting over the last several days because of newly available shares to borrow for shorting.
The convertible holders who converted are an interesting wild card. We don't know whether they were paid in stock or entirely in cash. We don't know how they hedged their position or how they unwound it. Their actions could have the result of moving large blocks of stock on or off the market, either short or long, and could account for some of the weirdness related to "shares available" vs. short interest... but I don't have a decent scenario here.
Mario Kadastik
Active Member
And today:
TSLA: 87.3k to short, 11.55% rate
SCTY: 276k to short, 10% rate
So some serious amount of shorting has been going on.
Where did these shares COME from? That's my question. Obviously with so many SCTY shares available, and SCTY having a lower borrow rate than TSLA, SCTY got hit more than TSLA did by the incoming wave of shorts. But I can't figure out where this huge wave of shares in the lending program *came* from, especially since Schwab still doesn't want my shares!
Which million-share-holder put their shares into the lending program this week?
Which million-share-holder put their shares into the lending program this week?
adiggs
Well-Known Member
adiggs
Well-Known Member
There are really two rates involved in a short transaction. In your quote, I'm pretty sure those are the interest rates paid by the entity establishing the short position, for the purpose of borrowing shares that they then sell.
Those shares come from owners who lend them out, and are paid a (lower) interest rate to loan out their shares. Broadly speaking, the rate paid to share owners to loan out their shares is about 1/2 of the rate that a brokerage charges to loan shares. You can think of it as a share owner loaning shares to somebody directly, with a brokerage acting as the middleman to facilitate the loan, with 1/2 of the interest rate paid by the entity going short to the brokerage, and the remaining 1/2 paid to the share owner.
adiggs
Well-Known Member
Correct - the rates are annual. I'm pretty sure that the amount due is calculated and collected daily - I know that the accrued interest I get paid is calculated daily and deposited monthly. Considering how the rest of the process works, I'm pretty sure the daily interest is collected (in cash) by Fidelity every day.
So right know Fidelity is paying me 5% to borrow my TSLA shares. If I were loaning out $120k worth of stock for a whole year (which requires assuming that the stock price doesn't change for a year - of course it changes daily, so the size of the loan is also changing daily), then 5% on $120k is around $6k in interest I'll be paid over that year, or $500/month. In a 30 day month, that's about $17/day in interest. And yes - 30 days in the month is the right way to think about it - the daily interest continues to accrue over the weekends
Oh - and that means the person that borrowed the shares is probably paying 10% to Fidelity to get the shares in the first place, so they're paying out $12k/year to keep the position open (using my example from the previous paragraph), or $1k/month. That's about $33/day they're paying to have the position open (and I suspect, they dislike weekends as much as I like them
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