What do you accomplish from borrowing some one else's stock if you have to return it ? Wouldn't that require for you to buy the stock at doesn`t matter what price it is on the market ? And while you hold their stock, don't they miss out on the profit it might be making while you have it ? Don't they mind ?
Are you returning their stock near no change surrounded by price or reflecting the current market price of the stock or simply returning the stock?
Answers: The most adjectives reason to borrow stock is to deal in it short. You think the price will walk down, so you borrow stock and sell it immediately. Later on, you hope to buy it in the marketplace at a cheaper price, in proclaim to close out the loan. If the price goes down, you bring in a profit. If the price goes up, you lose. It's the original formula of "buy low, sell high", except you get rid of high presently, and hope to buy low in the hard by future.
When you borrow stock, you enjoy to put up some kind of collateral, which is what give the lender security that they will obtain their stock back. If you put up lolly as collateral, the lender has to income you interest--usually at a pretty low rate. From lender's point of view, you could enunciate that they are borrowing cash from you, and using their stock as collateral.
No, the lender will not miss out on any profit. First bad, if they need to flog, they can always hail as the loaned shares back (if you are the borrower and this happen, you will have to find another source for the stock, if not close out your short position--but your broker can arrange all of this for you). Second, the lender have the right to any dividends paid on their loaned-out shares. If you borrow shares and they income a dividend, you have to administer the money to the lender. Again, your broker should deal near the mechanics.
When you return the stock, you get your collateral pay for, plus any interest that accrued. There is no open market fluctuation involved.
Hope it helps.
I assume that your interview relates to selling stock short. You are actually selling the stock at bazaar price in the hope that the price of the stock will walk down. Then you would buy it back at a profit. The broker "borrows" the stock for you to supply.
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Answers: The most adjectives reason to borrow stock is to deal in it short. You think the price will walk down, so you borrow stock and sell it immediately. Later on, you hope to buy it in the marketplace at a cheaper price, in proclaim to close out the loan. If the price goes down, you bring in a profit. If the price goes up, you lose. It's the original formula of "buy low, sell high", except you get rid of high presently, and hope to buy low in the hard by future.
When you borrow stock, you enjoy to put up some kind of collateral, which is what give the lender security that they will obtain their stock back. If you put up lolly as collateral, the lender has to income you interest--usually at a pretty low rate. From lender's point of view, you could enunciate that they are borrowing cash from you, and using their stock as collateral.
No, the lender will not miss out on any profit. First bad, if they need to flog, they can always hail as the loaned shares back (if you are the borrower and this happen, you will have to find another source for the stock, if not close out your short position--but your broker can arrange all of this for you). Second, the lender have the right to any dividends paid on their loaned-out shares. If you borrow shares and they income a dividend, you have to administer the money to the lender. Again, your broker should deal near the mechanics.
When you return the stock, you get your collateral pay for, plus any interest that accrued. There is no open market fluctuation involved.
Hope it helps.
I assume that your interview relates to selling stock short. You are actually selling the stock at bazaar price in the hope that the price of the stock will walk down. Then you would buy it back at a profit. The broker "borrows" the stock for you to supply.
Resolved Questions: