Stock Lending
Robinhood added stock lending to their platform. Can I lend the stocks from the company I work at or does that still somehow fall within insider trading policies?
No, care to explain?
I think lending is probably not allowed because lending shares allows borrowers to short your company stock. Usually company policy (no actual laws as far as I know) disallow you from shorting company stock so indirectly allowing short interest in company stock through lending is also probably not allowed. Will your employer find out? If you are a rank and file employee, I think it’s extremely unlikely. Btw If you have a margin account, it’s possible that your broker is already lending out your shares. Interactive brokers I believe is the only broker that explicitly asks even if you have a margin account and splits 50/50 with you. However, I think it’s unlikely your employer allows you to hold shares in a margin account anyways.
You’re not personally allowed to short sell. Saying you’re not allowed to loan shares because someone else’s short interest is being satisfied is a huge stretch. You still have long interest.
Example scenario of lending: Someone wants to short oracle. They borrow shares from you at 6% interest. They sell the shares. 3 weeks later Oracle crashes 40% and the person who borrowed the shares buys them at the discount and then returns them to you. They sold when oracle was high and bought when it was low to return back to you and kept the diff as profit.
This is a question to ask your company's HR. You can't choose which stock you can lend in Robinhood, you can only enable or disable stock lending as a whole. I'd be very surprised if you couldn't lend your own company's stock though. You're still holding it and not betting against it.
How do you benefit by stock lending? Are there any risks?
You get paid half the interest your broker charges so like 2-3% or maybe more for sought after shares. There shouldn’t be any downside. “In the event that the short seller is unable (due to a bankruptcy, for example) to return the shares they borrowed, the broker is responsible for returning the borrowed shares.” (Investopedia)
Pretty sure you only get 20% at robinhood, and I’m pretty sure that’s the industry standard.
You know what stock lending is right?