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Strategies & Market Trends : Shorting stocks: Mechanical aspects -- Ignore unavailable to you. Want to Upgrade?

To: Vol who wrote (114)	9/2/1998 5:45:00 AM
From: Daniel Chisholm	Respond to of 172

<<banjo, if your long stocks is your margin, how do you make the 2%?>> From interest earned on the cash proceeds from the short sale. Most brokers do not pay any interest on this segregated amount (equal to 100% of the marked-to-market value of the short position). Now if you are able to somehow talk a broker out of this 4-5% per year bonanza that they enjoy (after all, they get to invest your short sale proceeds in the normal course of their business activities), I wonder how much you'd have to pay for borrowing the stock? As it is, brokers charge you no interest on the stock loan, and pay you no interest on the proceeds. I understand that there is a cost involved in stock loans, which can vary (especially in the case of hard-to-borrow stock), but it must surely be substantially less than the T-bill rate most of the time. Anybody know the nitty gritty here? - Daniel