Hot answers tagged short-selling
As 'sheegaon' suggested, you can solve for an implied interest rate -- which is not necessarily the cost of borrowing the underlying stock -- using put-call parity. As you probably know, an implied volatility algorithm increases and decreases its implied volatility guess until the theoretical price and market prices of an option converge. Similarly, to ...
The cost of the hedge does not appear directly in the price for any one option, but rather will appear as an apparent violation of put-call parity. However, due to differing demand for puts and calls, this merely widens the arbitrage bounds ordinarily set by put-call parity, but does not imply a single implied borrow rate. In other words, the borrow rate ...
A "Valuation Short" is a short idea based solely on valuation (fundamentals). This is presumably a "bad" idea and one of the quickest ways of loosing all your money. A "Structural Short" is said of shorting a company with a mature business model in decline, or shorting a stock that is becoming obsolete or significantly less competitive due to some major ...
'Inst. Owned' almost surely means "Institutionally Owned". With respect to the 103% ownership reported: Discrepancies caused by varying time lags in reporting ownership may skew the results Second, and perhaps most likely, is due to short selling. I might own 100 shares, lend them to Bill, and Bill might sell (short) the stock to Nancy. In this case both ...
I think this paper (which I skimmed once a long time ago and no longer have access to) may provide some insight: Cohen, Lauren, Karl B. Diether, and Christopher J. Malloy. "Shorting Demand and Predictability of Returns." Journal of Investment Management 7, no. 1 (2009): 36-52. It seems to consider stock loan fees which may be a proxy for "hard to borrow".
In 2008, the SEC instituted an exemption for market makers to allow them to sell short for the purposes of bona fide activities related to market making in options. However, "for new positions, a market maker may not sell short if the market maker knows a customer or counterparty is increasing an economic net short position".
Are there any regulations baring shorting these 'shadily marketed stocks' ? In the markets I'm most familiar with, Canadian, the answer is no. To be honest the biggest hurdle you'll come across is how do you short penny stocks that are being pumped and dumped? 1) There will often be no options on these so you can't use that avenue 2) Where will you ...
Reach out to your prime broker and ask them for a history of borrows and rebates. Another realistic source of borrow rates can be imputed from the options data (though, then you would be restricted to the optionable stock universe).
I'm not an expert on this topic by any means, but my impression is: Generally brokers will not charge for locates unless you start asking for a lot more than you end up using. Locates are good for one day only. I would imagine the brokers themselves are charged some small fee for the locate, but for the customer this fee is just part of the commission ...
Please be aware when you back out implied interest rate for stocks with uncertain dividend payout.
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