Shorting question

[trade2make£]

Hello all,

Whats in it for the prime-broker/security lender to lend out their shares then recieve them back at a lower market rate? is it simply the commision they earn?

Regards,

 

[Rhody Trader]

There's also generally a lending rate on borrowed shares. It can sometimes get quite high if a lot of people are trying to short a stock.

 

[trade2make£]

Thanks for reply,

So even if the shares dramatically decrease, the lender would get the shares back a half the price and if the lending rate fails to offset the loss, would that just be a loss or is there ways they hedge this? Would the lender just turn you down to borrow the shares if he to thought the price would drop....would they only lend shares if they beg the differ and thought the price would increase?


Also....rather of topic I know but: im currently using OANDA fx game and only have a limited number of currency pairs... say I wanted to go long NZD/JPY and yield the net interest ~ but I cant find that combination in the drop down menu ???????

1st attemp to trade currency's if it seems like a silly Q.

 

[1Pipped]

Thanks for reply,

So even if the shares dramatically decrease, the lender would get the shares back a half the price and if the lending rate fails to offset the loss, would that just be a loss or is there ways they hedge this? Would the lender just turn you down to borrow the shares if he to thought the price would drop....would they only lend shares if they beg the differ and thought the price would increase?


Also....rather of topic I know but: im currently using OANDA fx game and only have a limited number of currency pairs... say I wanted to go long NZD/JPY and yield the net interest ~ but I cant find that combination in the drop down menu ???????

1st attemp to trade currency's if it seems like a silly Q.

Hello trade2make£, you can add all the pairs oanda has to the dropdown, by looking in 'account->user preferences->quotes' or something like that, I cant remember the exact menu sequence off top of head.

.

 

[trade2make£]

yea literally just found that out...thanks.

Is there any restrictions to the combinations you can trade in the eight majors?

I understand the concept of executing a trade based on int rates....is the rest technical analysis on the charts or is interest rates just a small part of the selection?

 

[Jaydee]

There's also generally a lending rate on borrowed shares. It can sometimes get quite high if a lot of people are trying to short a stock.

Yes, an example of this was Northern Rock last year. It became the most borrowed stock in the FTSE 100. I heard the premium for an overnight short was frightening.

 

[trade2make£]

Also; Does anyone know of a good simulation similar to that off OANDA, that can work offline....maybe download historical data from the web but can trade offline?