Short selling a stock has become an increasingly popular way for traders to profit off of negative market action. But sometimes short selling comes at a steep price.
In addition to the risk of making a losing trade, short sellers often must pay extremely high fees to borrow the stocks they need to complete a short sale. Those fees can eat into profits quickly and create tremendous pressure on short sellers to close out their positions.
The daily borrow fee is calculated as the borrow rate times the market value of the security divided by 365 days in the year.
S3 Partners analyst Ihor Dusaniwsky recently said stock lending is a market based on simply supply-demand economics, meaning stocks that are in high demand among short sellers can see borrow fees spike quickly. High borrow fees can also carry some useful information for contrarian traders as well.
“High stock borrow fees can also be an indication of how crowded a short has become, a higher borrow fee can correlate to a crowded short,” Dusaniwsky wrote in a report.
Most Expensive Shorts
Here’s a list of the 12 stocks with the highest stock borrow rates (minimum $50 million short interest), according to S3.
- Beyond Meat Inc (NASDAQ: BYND), 115.1% fee.
- Tilray Inc (NASDAQ: TLRY), 64.8% fee.
- Overstock.com Inc (NASDAQ: OSTK), 61.8% fee.
- Health Insurance Innovations Inc (NASDAQ: HIIQ), 61.6% fee.
- Evolus Inc (NASDAQ: EOLS), 55.3% fee.
- Qutoutiao Inc - ADR (NASDAQ: QTT), 44.8% fee.
- Tellurian Inc (NASDAQ: TELL), 43.1% fee.
- Pagerduty Inc (NYSE: PD), 41.8% fee.
- Accelerate Diagnostics Inc (NASDAQ: AXDX), 38.3% fee.
- Aphria Inc (NYSE: APHA), 37.8% fee.
- Zoom Video Communications Inc (NASDAQ: ZM), 36.8% fee.
- Canopy Growth Corp (NYSE: CGC), 36.3% fee.
14 Top Cannabis Stocks Targeted By Short Sellers
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|Sep 2019||Initiates Coverage On||Underperform|
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