As retail traders have become more sophisticated and online trading platforms have offered more features, short selling has become an increasingly popular way for traders to profit off of a stock’s downturn. Unfortunately, sometimes short selling can be an expensive venture.
In addition to the risk of making a losing trade, short sellers often must pay extremely high fees to borrow the stocks they need to complete a short sale. Those fees can eat into profits quickly and create tremendous pressure on short sellers to close out their positions.
A stock’s daily borrow fee is its borrow rate multiplied by the market value of the security divided by 365 days.
S3 Partners analyst Ihor Dusaniwsky recently said stock lending is a market based on simply supply-demand economics, meaning stocks that are in high demand among short sellers can see borrow fees spike quickly. High borrow fees can also carry some useful information for contrarian traders as well.
“An increase in stock borrow rates may force (squeeze) some short sellers into closing their positions – getting out to realize their remaining mark-to-market profits and exiting before other buy-to-covers drive the stock price up,” Dusaniwsky said.
Most Expensive Shorts
Here’s a list of 10 stocks with borrow rates of at least 30%, according to S3.
- Liminal BioSciences Inc LMNL, 80.4% borrow fee.
- CEL-SCI Corporation CVM, 64.6% borrow fee.
- Beyond Meat Inc BYND, 59.5% borrow fee.
- Ballard Power Systems Inc BLDP, 49.2% borrow fee.
- Energous Corp WATT, 45.5% borrow fee.
- Tilray Inc TLRY, 45.0% borrow fee.
- New Age Beverages Corp NBEV, 40.7% borrow fee.
- BP Prudhoe Bay Royalty Trust BPT , 35.1% borrow fee.
- TapImmune Inc. MRKR, 34.4% borrow fee.
- Intelligent Systems Corporation INS , 30.0% borrow fee.
Traders going short stocks with borrow fees of 10% or higher need to be extremely careful or plan not to keep the position open for very long. In fact, short sellers should consider avoiding these expensive stocks all together unless they have a good reason to believe there is significant downside ahead in the immediate future.
Originally Posted on December 17, 2019 – 10 Stocks With At Least 30% Borrow Fees
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