Need advice: shorting and securies lending

[spino1i]

So I want to get into shorting, but I discovered whenever you short something, you have to give up collatoral money (anywhere from 30%-100%) for whatever stock you borrow. Since you dont get the interest off this money, you lose access to it and the possible interest it could make. If the margin rate is 11%, and you are forced to give up 50% collatoral, you have to borrow the other 50% if you want to buy a stock of the same value that you shorted with your short money. This causes you to have to overcome a 11%/50% = 5.5% tax on your return whenever you short anything. However, the flipside of this is if you can become a lender of stocks then you can profit up to an extra 5.5% if you lend out your stock to short sellers.

I am intersted in how to get into this (I have around $80,000 in stock right now). Which brokerages offer the best interst rates? So far i've only run into brokerages that either offer crappy interest rates on "hard-to-borrow" stocks or are only intersted in you if your worth more than $100 million dollars!

I am also wondering what brokerages would let me put up a low amount of collatoral, or give me some interest on my collatoral money if I short sell at their brokerage.

Anyone know more about this stuff?

[pig4bill]

Eh, you may want to consider why there is so much demand to short a particular stock. It may be a piece of crap. So you may earn 5.5% interest on the way to losing 30% on the stock.

If all you want is an extra 5.5% a year, instead of buying stocks people want to short, consider buying good stocks and selling covered calls against them.

[SuitedPair]

I don't know of any brokers that are going to give you a short rebate with a small account. Additionally, I doubt any will give you the rebate for lending out your shares.

I have extensive experience in short selling and unless you will be watching your portfolio on a daily basis, I would avoid it.

[spino1i]

[ QUOTE ]
I don't know of any brokers that are going to give you a short rebate with a small account. Additionally, I doubt any will give you the rebate for lending out your shares.

I have extensive experience in short selling and unless you will be watching your portfolio on a daily basis, I would avoid it.

[/ QUOTE ]

Out of curiosity, whats the definition of a "small" account? In other words, whats the minimum net worth I need to start getting some rebates?

By the way, I do spend like 4 hours everyday checking my stocks and doing reasearch and stuff. I do way more stock research than I play poker lol

I really want to short JSDA and BAM, but im waiting to get a good deal before I do so.

[SlowHabit]

The only time I would ever consider shorting is if I'm working for a firm and I'm investing with other people's moneys.

[thehun69]

I think you need to reevaluate the stocks that you are considering shorting. BAM has nicely bounced off of its support at 38, and JSDA is right at 15 wich is a strong support level there as well. You should only short either one of them once it has cracked those marks. Otherwise you are giving your money away.

THE HUN.

[yellowbastard]

Recently I was looking at the billboard company Lamar Advertising (LAMR) and noticed that it was way overvalued (128x earnings) with debt-to-equity of 2.23.

Would these be good reasons to go short on this stock, or buy puts?

[thehun69]

On a technical basis, I'm not a huge fan of shorting it here. There is support here at the 62.50ish to 63.50ish level and it will probably be bouncing from there to 65 or so. Not a great play. Once it gets down to 60 and goes below that, now you are off to the races. I only trade on a technical basis.

THE HUN.

[DcifrThs]

[ QUOTE ]
On a technical basis, I'm not a huge fan of shorting it here. There is support here at the 62.50ish to 63.50ish level and it will probably be bouncing from there to 65 or so. Not a great play. Once it gets down to 60 and goes below that, now you are off to the races. I only trade on a technical basis.

THE HUN.

[/ QUOTE ]

would you mind posting your returns for the time that you have traded on a purely technical basis?

thanks,
Barron

[SuitedPair]

net worth and account size are two different items. I really don't know what size you would need. I think having an account of $1mm would do it, maybe $500k. And then it is likely to be a low rate.

I googled this and found a blog that said Muriel Siebert offers a short rebate. You might want to try that. It said it pays 1.875% based on fed funds, which is at 5.25%. For comparison, my base rate is fed funds less 25 basis points.