Honest question
$GameStop (GME.US)$ when you borrow a share, do you have to sell it or can you return it for the interest? Not sure how it works as I try to never borrow anything so have yet to try and borrow stock.
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OPINIONS ARE NOT FINANCIAL ADVICE
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MARKET-TEST-DUMMYOP : Lending shares seems pretty crooked anyway
MARKET-TEST-DUMMYOP : Its possible to borrow against your own position as well I assume
Iakul :
What other use do you have for a share you borrow besides selling it?
MARKET-TEST-DUMMYOP Iakul: If you borrow said share and you notice things turning up is it an instant return or selling process? Sorry for not being really elaborate.
MARKET-TEST-DUMMYOP Iakul: Also if bag holding a stock is it beneficial to short it? Or can you even? Like I said it all seems crooked as hell. Don't expect it to be perfect but more evenly played would be nice.
Iakul MARKET-TEST-DUMMYOP: As in I can’t think of any other reason for you to borrow a share other than to short sell, so in effect both happen simultaneously for retail investors
Daight : what do you mean return it for the interest?
when you borrow a share you are charged interest daily, every stock has a different interest rate.
you can technically not return the borrowed shares as long as you can pay the interest rate.
shorting is just selling the borrowed shares, you still have to return it at the end, but you can delay the return as long as you can pay the interest.
the interest is charged daily /364.
if your interest rate is 4% and a share is $100, your interest rate is (100x4%)/364 = $0.01 daily per share.
You might think the fee is cheap, but you also have to pay transaction fees and might even have to pay dividends to the lender as well.
not to mention to instill fear to other investors to panic selling you need a huge sum of shares and capital to borrow the available shares.
It is not recommended for small and medium scale investors.
MARKET-TEST-DUMMYOP Daight: And he said "let there be light" ... Thank you for the breakdown. So much more clarity now.
Iakul MARKET-TEST-DUMMYOP: If you are holding a stock, you can’t short it, as doing so would just create a net neutral position, and if it were allowed, would just give you nothing while you incur transaction fees. You can however create something similar to a short position with options if you are holding stock, to hedge your position
MARKET-TEST-DUMMYOP Iakul: So even if using a different platform, like a form of covered call
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