![]() ![]() That is because the broker has “borrowed” the stocks and given you collateral. From my understanding of the program it is relatively disadvantageous to use this program with dividend stocks. ![]() None of the following is tax advice, consult your accountant. Fidelity has a higher theoretical rate, but I personally hate their User Experience. ![]() Ally simply compensates me for being a participant in the program where they can lend at their relatively high margin loan rates. If you have a portfolio of stocks that have a high short interest, you may receive more income. But that is 0.66% more than I would have received and I take on effectively no more risk. In my case it is about a 0.66% annualized rate based on the stocks in my portfolio. This depends on your broker, but Ally provides a monthly cash rebate. How are you Compensated with Fully Paid Securities Lending? Being enrolled in a program like this allows brokers to do this automatically and programmatically instead of having to search the market for willing shareholders. To fulfill demand, brokers need participants who are willing to have their shares borrowed. Sometimes, due to events like increased short selling, limited supply or corporate events, it becomes more difficult to borrow against certain securities. ![]() Margin lending is when your shares are borrowed by other investors either to sell short or increase a position beyond cash available to the other investor. So how does Fully Paid Securities Lending work? Some brokers like Ally, WeBull (referral link), Fidelity, Schwab, and others allow you to lend out your shares to short sellers and earn a nominal fee. Fast forward to January 2021 and I checked my account’s cash balance and noticed it was a bit higher than I would have expected given that I typically go broke investing. As a fan of making extra money I obliged and thought nothing of it. Sometime in 2020 one of my brokers, Ally, sent me an email asking me if I’d like to earn a little extra money by lending my stocks to short sellers. ![]()
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