04-15-2021, 09:44 AM
Don't expect them to be loaned out for months, especially at those rates. Usually you get a day or two at a time, though of course if there are takers (and there seems to be due to the massive interest rate) then they will likely get loaned again very fast. Most of the time the turnover is extremely fast.
There are two catches.
1. The broker is making fortunes out of this. Good thing fidelity is nice enough to give you a part of it. I know that with IB they keep 50% and they give 50% to the owner of the shares.
2. Those shares are covered by a cash collateral, from what I understand it's deposited at the time the loaning happens. So if you loan them out at $100 per share and the share goes up to $120, then you may (check the paperwork) still only have $100 collateral. This shouldn't be an issue unless the shorter goes belly up. Fidelity may or may not be required to step in if this happens and cover the rest so you have your shares, check the paperwork.
I used a similar program for years, though I am currently unsubscribed due to the gamestop situation.
There are two catches.
1. The broker is making fortunes out of this. Good thing fidelity is nice enough to give you a part of it. I know that with IB they keep 50% and they give 50% to the owner of the shares.
2. Those shares are covered by a cash collateral, from what I understand it's deposited at the time the loaning happens. So if you loan them out at $100 per share and the share goes up to $120, then you may (check the paperwork) still only have $100 collateral. This shouldn't be an issue unless the shorter goes belly up. Fidelity may or may not be required to step in if this happens and cover the rest so you have your shares, check the paperwork.
I used a similar program for years, though I am currently unsubscribed due to the gamestop situation.