05.13.2015

Short Stock? How To Save On Equity Borrow Costs In The Options Market – Bloomberg Tradebook

Statistical arbitrage, merger arbitrage and just plain “hater” strategies involve selling in anticipation of a decline in the price of a stock. Because U.S. SEC Regulation SHO requires short sellers to locate where they can borrow stock prior to selling the shares in the market, most traders naturally look to the stock loan market for rates at which they can borrow the stock. Stock loan is not the only market to determine borrowing costs, however. Equity short sellers should also look at the options market to see if, via an options strategy, they can generate alpha by saving on their borrowing costs.

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