0
$\begingroup$

I am currently holding a stock.

I can see that the stock is trading at slightly above the future price.

I don't expect it to pay any dividend for a while.

Are there reasons that I should not sell my stock and then buy the future contract to retain my position? Assume I don't want to change my position.

I am trading in HK market if that matters.

$\endgroup$
4
  • $\begingroup$ transaction cost, also how far in the future are you comfortable with? which stock is this if I may ask? $\endgroup$
    – John
    Jul 7, 2020 at 1:12
  • $\begingroup$ @Jonat thanks, 2382 HK $\endgroup$ Jul 7, 2020 at 3:27
  • 1
    $\begingroup$ check borrow rate you can get on this stock (some brokers let you lend your stocks) $\endgroup$
    – alexprice
    Jul 7, 2020 at 12:18
  • $\begingroup$ @alexprice Indeed, my broker allowed me to join an automatical stock lending program. It automatically lends my stock to shorter and earns me a borrowing rate. So far my stocks aren't lent though. $\endgroup$ Jul 7, 2020 at 14:32

1 Answer 1

2
$\begingroup$

you should estimate cashflows in both cases, and to see what is more advantageous for you. The cashflows are:

1) borrow rate cash if your stock is lent
2) interest rate cost if you intend to hold for a long period
3) potential dividends (if your holding period encompasses ex-div date)
4) cost of rebalancing future position if you intend to have exposure encompassing several future rolling dates

You could also consider deep in-the-money call (you would have leveraged stock position then).

$\endgroup$
1
  • $\begingroup$ In other words, the extra advantage of holding a stock is that it enables me to lend it to others for shorting? $\endgroup$ Jul 8, 2020 at 1:35

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.