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Strategies & Market Trends : The Final Frontier - Online Remote Trading
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To: LPS5 who wrote (10482)8/30/2002 5:41:49 PM
From: Ira Player  Read Replies (1) of 12617
 
isn't borrowed by the brokerage firm per se

"Borrowed" is still a reasonable simplification for the average user.

how large your account and average positions are

I have 2 accounts where I receive interest on short sales and 2 that I do not. Both that pay interest required a specific request and 1 required a threat to move. They do not offer it proactively! The rate on both is equal to that received on idle funds or is used to offset margin interest, if applicable.

Smaller accounts would have been turned down.

I believe (empirically derived, not data that can be referenced) that most retail short sellers do not receive interest, either because their brokers do not allow it or because they haven't asked.

In higher interest rate days, I would sometimes sell DITM puts and simultaneously short the stock. This generates cash to offset interest expense. It is effectively a short call, but has the "benefit" of interest relief (or income) and the "strike" of this synthetic call is well out of the money.

Anyway, I believe the "loaning" of stock for short sales is a significant profit center for some brokers, except from the few investors that are vocal and therefore get their share!

Ira
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