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To: Fishtalk
When you buy a stock, you don't get a physical stock certificate. You broker gets confirmation of your "ownership" and maintains it for you. Those same brokers maintain Stock Loan Departments which are nothing more than stocks available for loan at a price.

If I want to short a stock, I contact a stock loan department to borrow it. If I approve of the financial terms, I borrow it and sell it hoping that, when I have to return it to the Stock Loan Department, I'm buying it back at a lower price.

28 posted on 01/29/2021 6:03:07 AM PST by Renkluaf
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To: Renkluaf

Which is another way robinhood makes money, by loaning out their long street name securities.


30 posted on 01/29/2021 6:05:34 AM PST by 1Old Pro
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To: Renkluaf
When you buy a stock, you don't get a physical stock certificate. You broker gets confirmation of your "ownership" and maintains it for you.

This I did not know.

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Those same brokers maintain Stock Loan Departments which are nothing more than stocks available for loan at a price.

At what price? Does the broker set the price? Because as I understand, the hedge funds have an estimate what the stock price will eventually be so why is the broker setting the price? Or does the borrower wait until the broker offers a "loan" of the stock agreeable to the buyer's estimate of what the stock will eventually be?

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If I want to short a stock, I contact a stock loan department to borrow it. If I approve of the financial terms, I borrow it and sell it hoping that, when I have to return it to the Stock Loan Department, I'm buying it back at a lower price.

Does the broker tell you when you must return the stock? The buyer does not decide this? And the borrower immediately sells the stock and awaits a time to pay for it? When the time is right, however decided, the "loan" is the stock price at the time of payback? If I paid $100 a share when I borrowed the stock but it is only worth $50 a share when I pay back, then I have made $50 a share?

I am trying so hard to understand this. And I do invest in the stock market but through a mutual fund type thing.

36 posted on 01/29/2021 6:18:29 AM PST by Fishtalk (@patfish1 is my Parler user name)
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