Fully Paid Lending Program by Fidelity

[chassis]

I received my documents today and they only reference a single security that I own - ARKG. I take it to mean that ARKG is the only security of interest, but it's hard to know for sure. Also, it seems to me that it might be best to use securities in a Roth IRA in order to avoid taxes on the income. I haven't decided whether or not to submit the paperwork but might try it more or less just to see how it works.

I am also thinking of participating in the program as a learning experience and to see how lucrative it might be.

The main point I wanted to know about is my risk and my downside. FAQ 5 on page 3 of the overview document states that the main risk is counterparty default. It states that the counterparty is Fidelity. So the question is - what is the likelihood that Fidelity will default on the program? My answer is - very low likelihood.

My wife is on board and we will probably try it. It can be terminated by me, or the "loan recalled" per the overview document.

 

[Lazyfabs]

OP, i'm in the process of setting up our annual mtg w/ our Fidelity account advisor person and is on my list to ask. we also received the 3 pdf, but the body of the email didn't provide any securities as well. think our portfolio is also too boring, but who knows.

after the mtg I'll report any info as well since we are on the fence as well.

salud

 

[jazz4cash]

Thank you !

Apparently my portfolio is too boring and bland, as there is no reference in the information e-mail on any lending interest. That's a shame, as any additional return within tax-advantaged accounts would be very much appreciated.

Same here.

 

[yhoomajor]

Please don't get too excited. Window of Loan usually lasts few days. So the real interest will be a fraction of that 2.x% or.

Not saying don't sign up for it. Something is better than nothing. But don't think of this as a steady stream of income. This isn't.

 

[DrRoy]

Just got my documents too. If I loan my RSP, the offer is 0.25%. Doesn't seem worth the trouble.

 

[catotx]

I signed up the FPL program with Etrade for my IRA a few months ago. All of my ARKG shares in the account are on loan shortly after I signed up. The net yield I get is around 2%.

Another holding, IDNA, is currently partly on loan. The yield for IDNA is higher than ARKG. The net yield paid yesterday was 4.8%.

There is little interest in my other broad-market ETF holdings.

 

[chassis]

@catotx Thanks for the feedback. The 2% ARKG and 4.8% IDNA yields - are you quoting annualized figures, or total return you received during the loan period?

 

[catotx]

@catotx Thanks for the feedback. The 2% ARKG and 4.8% IDNA yields - are you quoting annualized figures, or total return you received during the loan period?

These are annualized numbers. For example, if you loan out $10k of ARKG, you will get approximately 10000*2%/360 = $0.56 a day.

 

[jazz4cash]

I completed the form today. Very simple. Since I did not get any info on which if any of my stocks qualify, I decided to hold the form and reach out to my free advisor at Fido. I don’t know him too well so this a will be significant event to see how well we mesh.

 

[gregorit]

Getting 'something' is better than nothing. Most other brokerages lend out your shares and don't even give you a choice of getting any of the fees.

PS: No one should make any investing decisions based on 'lending returns', loading up on meme stocks for example, the return is minuscule compared to the extra risk.

 

[jazz4cash]

Getting 'something' is better than nothing. Most other brokerages lend out your shares and don't even give you a choice of getting any of the fees.

This what I always assumed.

 

[rayvt]

Most other brokerages lend out your shares and don't even give you a choice of getting any of the fees..

Only if the stocks are in a cash account and not a margin account. Hence the name Fully Paid Lending Program.

By definition, the stocks in an IRA account are fully paid.

I would say that most of everybody's non-IRA acccount are margin accounts, not because you intend to use margin, but because it is simpler.

 

[indiajust]

Schwab has a similar program which i have used several times. No issues.

 

[Broland]

I was hesitant at first, but got offered it through eTrade and accepted with IRA money. Some days I was making close to $100. a day! Others .10 cents ... I have no idea how the internals work, but I view this as any other leverage situation, but with no risk to me (that I'm aware of).

 

[RetirementNinja]

Yep I have been doing it for a few years. All pros, no cons really. You can't vote on shares that are loaned out if you care about that though. The system automatically moves shares out to cash "on loan" status when needed. I guess one con is if you want to sell all at once, it is harder since you have to sell from either of the loaned or non-loaned sides since the non-cash are held in usual margin. I usually make about $50/month. Highest interest I made was about 126% and normally about 18% or so when they loan them. One interesting observation, when people are borrowing it may mean your stock is dying.... I have gotten burned by holding too long and over those times the loans got pretty lucrative (but value decreased ).

has anyone participated in this program or looked into it?

pros/cons

thanks

https://www.fidelity.com/trading/fully-paid-lending

 

[jazz4cash]

I submitted the forms on Saturday by email and received confirmation this morning(Monday). The process has been initiated and I should be able to see activity on my account positions tab. Very easy so far. Learning about this program is another benefit of participating in this forum. Thanks, OP.

 

[Lazyfabs]

op here w/ an update

after talking to our account rep for the yearly 'free' checking call he stated that there are really no cons. as some have mentioned one would give up voting rights if shares are on loan and if one needed to liquidate shares and the shares are on loan might take a little bit longer, but that in his time at fidelity he has never hear from one of his clients that it has been an issue a rare occurrance from what he has heard from other coworker.

tip he gave was that when filling out paperwork that do for each account sepeately, i.e. don't comingle in paperwork joint accunts w/ individual accounts regardless if brokerage, iras, etc, or application would get kicked back. also, no need for signature guarantee, notary, etc.

seems pretty staright fwd and painless.

hope this helps,

salud