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AAAintheBeltway

Registered: Oct 2001
Posts: 14532

01-25-12 10:54 PM

I was scrolling through some old stuff from IB and found mention of this program. Apparently, if you sign up for it, they pay you half what they get for loaning out your stock. Since most brokers pay you nothing and still loan out your stock, it sounds like a no-brainer.

Some hard to borrow stocks command pretty hefty borrow fees, so I find this very interesting, unless I am missing something.

Anyone using this?

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Options12

Registered: Sep 2011
Posts: 550

01-25-12 11:12 PM

Quote from AAAintheBeltway:

I was scrolling through some old stuff from IB and found mention of this program. Apparently, if you sign up for it, they pay you half what they get for loaning out your stock. Since most brokers pay you nothing and still loan out your stock, it sounds like a no-brainer.

Some hard to borrow stocks command pretty hefty borrow fees, so I find this very interesting, unless I am missing something.

Anyone using this?

It sounds like an innovative but fair arrangement. If you sign up, please let us know how it turns out.

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AAAintheBeltway

Registered: Oct 2001
Posts: 14532

01-26-12 08:12 PM

I probably will. Does anyone see any downside to it? The only one I see is that you could possibly lose special tax treatment for dividends. They spell that possibility out in some detail. In an IRA that doens't matter.

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AAAintheBeltway

Registered: Oct 2001
Posts: 14532

01-27-12 12:37 AM

I should note that you cannot participate in this program in an IRA.

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jjs235

Registered: Jun 2009
Posts: 38

01-27-12 01:22 AM

Quote from AAAintheBeltway:

I probably will. Does anyone see any downside to it? The only one I see is that you could possibly lose special tax treatment for dividends. They spell that possibility out in some detail. In an IRA that doens't matter.

One downside would be the short seller who borrows your shares drags the price of the stock down. Then you would be getting a lower price when you sell potentially. Obvious volume is an important part of the equation relative to the stocks daily/weekly/monthly/etc. volume.

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Hurricane

Registered: Jan 2003
Posts: 766

01-27-12 09:42 PM

IB has a feature that allows you to estimate your earnings based on your current holdings. When I checked, the possible earnings were a pittance of my portfolio value. And as mentioned, there's some risk that you'll loose qualified dividend treatment (although IB says they take steps to avoid this). Loosing this treatment one time would wipe out many months of earnings.

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