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less risk as well.. when you are short you have unlimited risk.. when you
buy a put your risk is only premium......... ----- Original Message -----
From: "Jacobson, Alex" <AJacobson@xxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, October 07, 2001 2:11 PM
Subject: RE: [RT] VERY HEAVY BLK activity ON MSFT
> The public does goes the benefit of short stock rebate when they trade
puts.
> It is imbedded in the price ... so it really makes very little sense to
> short as na individual investor. Now that puts trade on almost every
name.
> I don't remember the last stats. .. but it used to be the average life of
a
> retail short on the NYSE was a couple of days.
>
> -----Original Message-----
> From: Ira Tunik [mailto:irat@xxxxxxxxx]
> Sent: Sunday, October 07, 2001 11:43 AM
> To: realtraders@xxxxxxxxxxxxxxx
> Subject: Re: [RT] VERY HEAVY BLK activity ON MSFT
>
>
> It is only the public that doesn't earn interest on short stock. As a
> market maker I earned broker loan rate on the cash received from short
> stock. During high interest periods you could earn more money being short
> stock then by trading. Especially after puts, because that made the
> reversal a relatively riskless marginless transaction. Also after several
> changes back and forth, market makers only had to have cash to cover
> risk, not the margin amounts that the public was subject to. Many
brkerage
> firms did the same thing through their floor operations. Generate
> cash from short stock and loan that money to their margin account
customers.
> The buying public became your bank. Things may have changed in
> the past few years, but I don't think so. If there is a way to make a
buck
> at the expense of the public, the firms will figure it out.
>
> Dorothy Carter wrote:
>
> > No doubt business picks up in bad markets.... no one is saying that the
> > brokerage firms don't make money from stock loans... as I stated
> earlier....
> > that's why they do it. One of the things I ask when I call for ok to
> short
> > a stock is to see if it is busy or if very many brokers are shorting
> > stocks... I use it like most use a put to call ratio.. some days if I'm
> not
> > shorting I call just to see how business is going just to see what their
> > business is like so I'm aware obviously after 27yrs in the biz. I would
> > still maintain that the average broker does not short and that many that
> do
> > have only a few sophisticated clients that do. Most brokers have gone
to
> > fee based busines vs comm.. .. I'm curious why the thought out there
> would
> > be that the brokerage firms would not charge interest on margin
> acct..(that
> > would be like going to a bank and not expecting to be charged interst on
a
> > loan and if fact int rates at brokerage firms are often lower than loans
> > that you can get at a bank!!! so don't know that "rip off" as suggested
by
> > Norm is accurate)..to my knowledge there is not such thing as a "stock
> loan
> > fee" as suggested in Norm's post... you are charged margin interest
> > though. anyway.. Thank God Monday is coming so we can get back to
market
> > trading ideas .. This thread is getting old..
> > ----- Original Message -----
> > From: "Infernal Elk" <infernalelk@xxxxxxxxxxxxxxxx>
> > To: <realtraders@xxxxxxxxxxxxxxx>
> > Sent: Sunday, October 07, 2001 2:47 AM
> > Subject: Re: [RT] VERY HEAVY BLK activity ON MSFT
> >
> > >
> > > >> NW: No, they are loaning the stock so they can earn the stock loan
> > fees such
> > > >> as interest on the credit balance. This source of income often
> exceeds
> > the
> > > >> commission end of the biz. Given the recent deep discounts on
stock
> > > >> commissions, I am sure the stock loan fees and interest they rip
off
> > from
> > > >> the public is more important than ever as a source of income.
> > >
> > > <unlurk>
> > >
> > > having worked in back offices on & off in the past, i have to say that
> > > stock loan (equities) & repos ("fixed" income) can be a *substantial*
> > > source of financing at relatively little risk to a large firm,
> > > depending on the sophisication of the software systems that enable the
> > > stock loan or repo desks (stock loans are essentially equity "repos")
> > > to manage the huge volumes of stock in & out of the firm's box hourly.
> > >
> > > some of the stock loan desks i have seen rival some proprietary
> > > trading desks in number of personnel. and the stock loan folks are
> > > just as busy, sometimes busier!!!
> > >
> > > it's not as sexy as the proprietary side, but in bad years, the stock
> > > loan & repo desks subsidize the proprietary traders' bonus pools -- no
> > > joke! i've seen it happen often enough at bonus time. stock loan is
> > > steady money.
> > >
> > > - *lk
> > >
> > > <relurk>
> > >
> > >
> > >
> > >
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> > >
> > >
> > >
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> >
> >
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