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Drizzt
LSU Fan
Cimmeria
Member since Aug 2013
10331 posts

Robinhood stock lending

I’m eligible for stock lending on Robinhood. This is my play money account but it’s over $100k now. Any thoughts on risk for this? From the research I’ve done you are basically loaning to short sellers who give you a fee and use your voting rights. Some risk they could not repay you in a massive short squeeze but this seems unlikely as I don’t own meme stocks. My main concern was if your shares aren’t returned prior to a dividend it seems like you could be taxed at a regular tax rate.

Any body on the board doing this and what are your experiences?


Strannix
USA Fan
District 11
Member since Dec 2012
44268 posts

What about when they force you to sell so the hedge funds can cover?


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j1897
Arkansas Fan
Member since Nov 2011
2781 posts

For what, like 1 percent/year? Better ways to make money.


thunderbird1100
LSU Fan
GSU Eagles fan
Member since Oct 2007
64977 posts
 Online 

Think it's 1.5% right now.

You can still sell the stock whenever and sell calls and whatnot against the stock. Doesn't seem to be a huge downside, just more passive income.


gpburdell
Georgia Tech Fan
ATL
Member since Jun 2015
1176 posts

1 month Treasuries are earning 2.15% with no risk. 3% if you go 6 months.


Volvagia
LSU Fan
Fort Worth
Member since Mar 2006
50800 posts

quote:

For what, like 1 percent/year? Better ways to make money.


It’s a nice boost for buy and holders. It doesn’t tie you down at all, you can sell the asset whenever.


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thunderbird1100
LSU Fan
GSU Eagles fan
Member since Oct 2007
64977 posts
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quote:

1 month Treasuries are earning 2.15% with no risk. 3% if you go 6 months.


Again, this is for stock you're already holding. I'm not saying go out and buy whatever stock and loan it out.

It's just passive income on stock you own, you can still sell the stock whenever and write calls, etc

This isn't about how should I put cash where, its just a way to make money on stock you own. It's simply an extra 1.5% or whatever they are giving.
This post was edited on 7/21 at 8:25 pm


Diseasefreeforall
Miami (FL) Fan
St Clair Co
Member since Oct 2012
4116 posts
 Online 

Yes, it's a no brainer to loan out stocks you plan to hold and there's no difference in your ability to trade them, you can still sell them like normal. I've made around $70k lending stocks since early 2020 but lately it's dried up because there's not as much shorting going on with the market being down.

I don't know about dividend tax implications but the main risk is that you can lose your shares if your brokerage goes bankrupt however unlikely that may be.
This post was edited on 7/21 at 10:12 pm


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Drizzt
LSU Fan
Cimmeria
Member since Aug 2013
10331 posts

Since you seem knowledgeable, what about the dividend tax issue. Robinhood says something like “we’ll try to return stock to you before the dividend date” which didn’t seem like a strong commitment to me. I’m sure they are phrasing it the way their lawyer tells them but is this a problem for people in actual practice?

Thanks diseasefreeforall for the comment.
This post was edited on 7/21 at 10:16 pm


Diseasefreeforall
Miami (FL) Fan
St Clair Co
Member since Oct 2012
4116 posts
 Online 

I've never had dividend stocks loaned out but it looks like if your dividend stock is loaned on the ex-dividend date you get what are called cash in lieu payments that's probably taxed as ordinary income. I'd say ask a tax pro to be sure but it may be tough to find one with expertise, my CPA knows nothing about fully paid lending programs.

Interactive Brokers guide to FPL


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iwantacooler
Member since Aug 2017
1563 posts
 Online 

quote:

This is my play money account but it’s over $100k now


Y'all make me feel like I don't belong on this board.


Drizzt
LSU Fan
Cimmeria
Member since Aug 2013
10331 posts

Everyone starts somewhere buddy. I’m 45 and didn’t start making real money until I was almost 40. Lots of good advice on here if you can tolerate the dickheads. Keep putting your money to work instead of spending it and you’ll do well.
This post was edited on 7/22 at 8:14 pm


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