I was going to say that it’s fine with me if my short call gets assigned and turns into a short position, but your comment on another thread about hard-to-borrow rates made me think I should look up the fees that my brokerage charges.
It looks like they’re a lot. If I’m reading the table below correctly, IB is currently charging 0.4% per day to short NKLA, and it’s been increasing.
Thanks for pointing this out!
> When the supply and demand attributes of a particular security are such that it becomes hard to borrow, the rebate provided by the lender will decline and may even result in a charge to the account. The rebate or charge will be passed on to the accountholder in the form of a higher borrow fee, which may exceed short sale proceeds interest credits and result in a net charge to the account. As rates vary by both security and date, IBKR recommends that customers utilize the Short Stock Availability tool accessible via the Support section in Client Portal/Account Management to view indicative rates for short sales.
It’s worse than that. If there weren’t any shares available at your broker for you to short-sell in the market, you should consider it likely that instead of paying 0.4%/day, you just are told you have to buy shares to cover your short from assignment. This is an absolutely normal thing that happens sometimes when it’s hard to find additional people to lend stock (which is happening now).
(Disclaimer: I am a financial professional, but I’m not a financial advisor, much less yours.)
I was going to say that it’s fine with me if my short call gets assigned and turns into a short position, but your comment on another thread about hard-to-borrow rates made me think I should look up the fees that my brokerage charges.
It looks like they’re a lot. If I’m reading the table below correctly, IB is currently charging 0.4% per day to short NKLA, and it’s been increasing.
Thanks for pointing this out!
> When the supply and demand attributes of a particular security are such that it becomes hard to borrow, the rebate provided by the lender will decline and may even result in a charge to the account. The rebate or charge will be passed on to the accountholder in the form of a higher borrow fee, which may exceed short sale proceeds interest credits and result in a net charge to the account. As rates vary by both security and date, IBKR recommends that customers utilize the Short Stock Availability tool accessible via the Support section in Client Portal/Account Management to view indicative rates for short sales.
https://ibkr.info/article/41
It’s worse than that. If there weren’t any shares available at your broker for you to short-sell in the market, you should consider it likely that instead of paying 0.4%/day, you just are told you have to buy shares to cover your short from assignment. This is an absolutely normal thing that happens sometimes when it’s hard to find additional people to lend stock (which is happening now).
(Disclaimer: I am a financial professional, but I’m not a financial advisor, much less yours.)
Thanks!