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Comment by Havoc | Hacker News Reader

I’ve got a share portfolio that generates a couple bucks a day in short share lending.

Literally just tick a box to give broker permission. Nothing is risky free but looked into it and as best as I can tell it’s a pretty good deal. No inconvenience, not much risk etc

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The problem with this though is that you are giving ammunition to those shooting at you. If their gambit succeeds (shorting), the value of your shares diminish. The net effect of doing this might not be entirely visible as a "smaller fish in the pond", but it is there none-the-less.

Yeah aware of that.

Short of a scenario like GME where there is an actual shortage of shares to short it won't move the needle given that available shares generally exceed borrowed shares.

It's a liquid market...so if I don't do this all that happens is the people shorting pay a fraction of a penny more in interest. For someone serious about strategically attacking something as a gambit / strategy that makes zero difference.

You can actually kinda see the effect in your own reports because it's proportional. e.g. If I have 1000 shares and only 200 get lent out then there isn't much short pressure. I've only seen it at 100% a few times and then interest rates soar so compensation for is good.

Ultimately it'll return to the intrinsic value of the company in the long run, so don't particular care about short term shenanigans

Yep like I said, but perhaps did not emphasize enough, your shares alone won't move the needle much, but the collective entirety of retail investors lending out their shares (whether they are paid for it or not) definitely does move the needle. And on top of that, the shorters have more supply to draw on and there is less price pressure on the shorting premium as a result.

Not if you are buying for the long term. The shorters need to close their positions eventually so that’s a buy back. The shorters can’t be long term.

That has been the prevailing wisdom, as far as I was aware of it. But as many have recently been made aware, there are sophisticated ways to continue rolling over your shorts while increasing your short position.

>If their gambit succeeds (shorting), the value of your shares diminish.

The causality here seems kinda confusing. People shorting an equity doesn't make it go down automagically. They don't have control over that.

They might be right that the stock will go down, but more likely, the shares are going to be used by someone riding trends of some sort.

If you're a long term investor, you don't care about short term trends. If you're planning on holding the stock for _years_, regardless of the performance over the next few months, then it's a nice way to generate income, and with less risk than doing something like selling Covered Calls on them.

The shorter borrows the stock to immediately sell (typically at the “buying” price of the spread). This creates immediate down pressure on the price, which is meant to be balanced by eventual up pressure when they have to buy shares to cover.

If you add up the effect on the price lending all retail stocks has on the market, it won’t be insignificant.

Looking at it the other way, if you can generate “less risk” income off it, you have to be aware that the people borrowing the stocks are earning more than they are parting with.

There is no free lunch on the stock market.

I had always assumed they just did that already without permission

Perhaps they do. If they get caught, though, that's big trouble with the regulators.

Its generally one of the forms you sign during application

Basically all of them will...Interactive Brokers is nice in that they have a clear "we'll give you a 50% cut of actuals on your shares".

Other brokers seem to either keep it or implement a far less transparent process.

Since I'm holding risky shares (and thus higher % interest on borrowings) I definitely that directly linked

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