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.
Which is another way robinhood makes money, by loaning out their long street name securities.
This I did not know.
-------------------------------------------
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?
----------------------------------------------
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.