The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Kalergie on July 29, 2017, 03:41:37 PM
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I just received an email from my Broker (Interactive Brokers) suggesting a new feature called Stock Yield Enhancement Program.
"You could earn extra income on the fully-paid shares of stock held in your account by joining IB's Stock Yield Enhancement Program. This plan allows IB to borrow shares from you in exchange for cash collateral, and then lend the shares to traders who want to sell them short and are willing to pay interest to borrow them. Each day that your stock is on loan, you will be paid interest on the cash collateral posted to your account for the loan based on market rates."
I'd love to hear what you think of this.
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The interest rate paid is usually quite low. Also, if you are holding a dividend payer; you will receive "payments in lieu" of dividends which will not qualify for 15% tax rate. I turned mine off.
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Thanks for the info. Do you know of any potential risks that should be considered?
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I can't imagine there is any risk. You still own the shares. Your counterparty has no information on you. The counterparty is legally obligated to surrender the shares if you sell.
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Intersting - I think many brokers already do this and just keep the interest unless you specifically opt out.
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I only hold VTI and VXUS. Can these even be shorted? I see conflicting info on that. If not, then there's absolutely no point participating in the program for me.