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Post by mannmade on Jun 23, 2014 19:55:51 GMT -5
Spoke with a friend of mine this afternoon who has couple hundred thousand shares... He is the real deal as I know him from investments we discuss regularly including Mannkind and I work with him on a few projects directly. He got a call from Fidelity today offering him 12% if he would consent to loan his shares.
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Post by BD on Jun 23, 2014 20:07:00 GMT -5
Niiiice. These are the sort of little tidbits that warm my heart  |
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Post by ashiwi on Jun 23, 2014 20:42:59 GMT -5
Fidelity is giving me 10.25% to borrow my shares. They are charging shorts 15.75 %.
The interest rate will fluctuate depending on the supply and demand. There's pretty much no more shares to short.
With an early approval and a decent label, we might actually be on the good end of a true short squeeze.
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Post by BD on Jun 23, 2014 22:24:07 GMT -5
So, I believe I've mentioned in the past that TDA once agreed not to lend out the shares in my margin accounts. I checked with them again on that today (as it has been several years since the subject was last broached), and I found out that they no longer make that promise. Glad I checked.
What I was not aware of, though, is that even in a margin account, if you're not USING your margin, they won't lend out your shares. I've got another query in to find out what the story is if you use margin and then pay it off: do shares that have been lent out come back, or not? I don't know yet. I'll keep you posted....
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Post by Chris on Jun 24, 2014 5:54:03 GMT -5
So, I believe I've mentioned in the past that TDA once agreed not to lend out the shares in my margin accounts. I checked with them again on that today (as it has been several years since the subject was last broached), and I found out that they no longer make that promise. Glad I checked. What I was not aware of, though, is that even in a margin account, if you're not USING your margin, they won't lend out your shares. I've got another query in to find out what the story is if you use margin and then pay it off: do shares that have been lent out come back, or not? I don't know yet. I'll keep you posted.... Slight OT but how do you like buying/trading on margin? What are your self established rules, BD? Thank you in advance! |
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Post by BD on Jun 24, 2014 7:13:04 GMT -5
chris, I don't "like" using margin at all... I consider myself very fortunate that when, the one time I really margined myself to the hilt (out of desperation, really, as I needed to generate income fast), the result was my first-ever GMCR short squeeze. That's the time I began taking profits too fast (in hindsight, of course) and ended up with a lot of taxes to pay that year...but I still think it's better to have profits and pay taxes on them than to have losses.
Anyway, from that moment on, I strived to never put myself into as precarious a position, and these days I'm almost never using any of the margin in any of the accounts I trade. When I do, I look for opportunities to pay it off. I've been able to generate "enough" income without margin, and I sleep better at night as a result. The great benefit of several years of successful trading is that, as my portfolio value goes up, I can reduce my risk and still generate the income that I need. Of course, it sure doesn't hurt when my largest positions all kick a$$ over the years (GMCR, MNKD, LVS).
Just last evening I was talking about the past several years of stock action with my son, and I became really aware of how crucial a component these boards have been to my investing process. (Yes, there was a bit of self-back-patting on my part...) Without seeing a bunch of really smart people all maintaining their confidence levels, I might have gotten a lot more shaken out over the years than I have. And ended up a lot poorer for it.
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Post by kc on Jun 24, 2014 10:10:43 GMT -5
No real risk to you if Fidelity loans out to somebody as its still your stock and if you want to sell it then Fidelity has to have it available for settlement upon your execution of the sell order. They have three days to settle your account but when you hit the key to sell its still your stock and they have then exchange somebody elses stock for your order. Its not a losing proposal for you.
Its my understanding that they don't even need to notify you if its in your cash account as they just do this in the back room and know what their outstanding orders are at any given time.
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Post by BD on Jun 24, 2014 10:13:52 GMT -5
Kc, it's not about risk, it's about principle. I don't want to facilitate somebody's shorting of my long positions. Let the short have just a bit more hassle finding his shares to borrow...
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Post by kc on Jun 24, 2014 10:18:57 GMT -5
I am with you on that issue. But I don't even think that Fidelity has to even tell you they have loaned it out if you have a cash account. You never know if you have the certficate or not as its in book form. So ethically or not all the brokers have your securities pledged out.
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Post by ashiwi on Jun 24, 2014 10:33:49 GMT -5
The loaned shares are not necessarily just used for shorting. A brokerage firm may need the shares available for option exercising.
I'm very happy getting my 10.25% while I wait. I can sell whenever I want.
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Post by Chris on Jun 24, 2014 10:34:56 GMT -5
chris, I don't "like" using margin at all... I consider myself very fortunate that when, the one time I really margined myself to the hilt (out of desperation, really, as I needed to generate income fast), the result was my first-ever GMCR short squeeze. That's the time I began taking profits too fast (in hindsight, of course) and ended up with a lot of taxes to pay that year...but I still think it's better to have profits and pay taxes on them than to have losses. Anyway, from that moment on, I strived to never put myself into as precarious a position, and these days I'm almost never using any of the margin in any of the accounts I trade. When I do, I look for opportunities to pay it off. I've been able to generate "enough" income without margin, and I sleep better at night as a result. The great benefit of several years of successful trading is that, as my portfolio value goes up, I can reduce my risk and still generate the income that I need. Of course, it sure doesn't hurt when my largest positions all kick a$$ over the years (GMCR, MNKD, LVS). Just last evening I was talking about the past several years of stock action with my son, and I became really aware of how crucial a component these boards have been to my investing process. (Yes, there was a bit of self-back-patting on my part...) Without seeing a bunch of really smart people all maintaining their confidence levels, I might have gotten a lot more shaken out over the years than I have. And ended up a lot poorer for it. Thank you, thank you for your informational response and taking the time to type it out. I was curious since one of my current rules is never to buy on margin but it doesn't hurt to reevaluate your personal financial commandments (as I call them). Awesome picks! I've had some stellar returns on other investments too. I still remember buying my first couple stocks (BAC at 5.32 and Motorola before the stock split and subsequent buyout of Motorola Mobility Incorporated and Arna to name a few). I'm pretty ecstatic to hopefully meet you and others from this board in time... Without this board, the other board and Agoracom I doubt I would have stuck through it all with MNKD or even take trading/investing as seriously as I do now. Currently and foolishly perhaps I've been spending a part of the profits to travel and explore the world - it's starting to seem like a bad idea with all my big bites here in Indiantown Marina, Florida. This ain't no place for a Los Angeles city boy! Thanks again for your comment BD! |
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Post by BD on Jun 24, 2014 13:16:57 GMT -5
Yes, chris, I look forward to meeting you as well... maybe I'll spring for a trip to the next annual meeting...
Anyway, I just got a reply from TDA about my shorting/margin question. It's good news (from my point of view). If you recall, my question was what happens to shares that have been loaned out while I had a margin balance if I pay off the margin and no longer carry any margin balance. This is the reply:
"Thank you for allowing me to assist you. If your shares were loaned out of your account while you had a margin debit balance, and you later pay off the margin debit, your shares would not be eligible for shorting at that point and TD Ameritrade would call the shares back."
This is great news. So, even if an account is authorized for margin, shares will not be lent out if I do not carry any margin balance. As I carry little or no margin balance, this definitely gives me the warm fuzzies. I think I'll even post about it on Yahoo, just for the heck of it...
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Post by BD on Jun 25, 2014 8:16:12 GMT -5
Addendum: Someone on the LVS board mentioned that putting in a GTC limit sell order at a high price will keep your shares from being lent out. Not true; this is the reply I got from TDA on the matter:
Thank you for allowing me to assist you today. Open order to sell will not prevent your shares from being lent out. The only way to prevent re-hypothecation of your longs shares is to own the shares in a cash account where they are fully paid for or own the shares in a margin account with no margin debit.
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Post by thekindaguyiyam on Jun 25, 2014 16:13:05 GMT -5
Addendum: Someone on the LVS board mentioned that putting in a GTC limit sell order at a high price will keep your shares from being lent out. Not true; this is the reply I got from TDA on the matter: Thank you for allowing me to assist you today. Open order to sell will not prevent your shares from being lent out. The only way to prevent re-hypothecation of your longs shares is to own the shares in a cash account where they are fully paid for or own the shares in a margin account with no margin debit. Hey. That's what TDA told me. I signed an agreement to a margin account allows them to borrow the shares no matter if they are in an out of reach price trade. Margin has been a real ride; but that's what you get when you dance with the devil. But, as you discovered once you got lucky you could eliminate that stress. Those are my plans as well. |
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