Webull was one of my favorite brokerage apps but there's something that you need to know Webull is
lending out your stocks and they're making money on it but don't think it's a Webull problem oh no
robinhood does it so does public soda stash they lend out your shares to short sellers and
in return they get a little bit of an interest and they make money after all most of these brokerages
are commission free and in order to make some money they got to do something this is one of the
ways they do that but see the thing is weibo has a different approach what they do is they actually
turn that around and share some of the interest with you and that's what we're going to talk about
in today's video now most of the brokerages they just pocket all the money themselves
but weeble shares just a little bit don't get excited but a little bit of that money with you
we are going to talk about the weeble stock lending program in this video here's what we're
going to cover what this actually means to you and how short selling actually works how you can make
the money based on the interest and be sure to stick with me until the end because i am going
to share if this is actually a wise decision to make for a couple bucks or if you should opt out
of the program altogether so if you're ready to get started as always don't be dumb tap the thumb
let's get right to it so let's start off with the basics how does this actually work so what
weeble does is that they lend out your shares to those who are short sellers then Webull collects
an interest charge of around three to eight percent or more and they give you basically 15
of the 8 collected mathematically it's not a whole lot of money now i don't know if you know this but
by law a broker cannot actually lend out your shares without your consent however in the world
of those long annoying terms and conditions when we sign up for things you know what we do we often
click right through everything without actually reading it so most likely no matter what brokerage
you signed up with you're likely already opted in so yes i have opted in to Webull and i have
been making some money on the weeble app so what we're gonna do let's first dive into the weeble
app i'll show you exactly how much i'm making how to find if you're making money on this and what
this is really all about right here it is this is my weibo account and you can see right over here
you're gonna go to the second tab that says p l i do gotta say for a second i'm really excited about
the fact in the last three months i've actually far succeeded the dow jones industrial average
at a 76 return super excited about that but here's where you find if your stocks are being lent out
now a lot of times what happens we're long-term holders a lot of us are here on this channel right
you buy stocks you buy shares of stock and the hope is someday it's going to go to the moon and
then we can profit off of all of that growth but what they do in the meantime is since you already
paid for you already own those shares they turn around they lend them out to short sellers who
try to make a quick buck on them and don't worry all of this time you're not actually like held up
to any type of standard that doesn't mean that you can't sell if you need to sell that doesn't
mean that you're going to be trapped up into some weird pyramid scheme or anything like that
it just means that weibo is doing this in the meantime it's kind of the same way almost a
savings account works in a sense where you save up all your money and you're earning interest on that
money in the savings account meanwhile the bank is taking your money and they're putting it out into
different loans or they're putting it out into the stock market or they're doing stuff with it
but you can always withdraw money out of your savings account anytime you want same thing here
so in this p l we're going to go down right here to where it says interest income do you see that
you're going to tap on that and that is going to show you if you have any money coming in from the
stock lending program now if not what you can do is there's a little link located right here
on the weeble app you click on that link and it'll take you over to a little bit of
a description about what this is so you can see not only your daily records but if you're not
enrolled it will have an option for you to click and enroll in this program if you wish to do so
now you can also look at the introduction right here which kind of tells you what i'm telling you
here in this video but let's go back here you can see that if i go all the way down here like okay
first right here at the top you can see my total interest received a whopping exciting accelerated
2.91 cents oh my god i'm so rich let's go all the way to the bottom here you can see now back
here in april look at that i'm making like not even a penny you see that .0075 and then i got
.008167 but if i click on it if i touch that it pops down and there i had an etf pff so they must
have loaned down pff to some short sellers 49 and i got a little bit of interest on that if i scroll
up here let's see what else is happening i did make a penny here on 8 16. oh look at that with
a beachbody stock yes i have bought into beachbody not financial advice but i'm just kind of blown
away at the price right now with that but you can see that they started lending out only six shares
but i did earn a penny off of that and i think this is what happened up here because there's
a lot of people shorting beachbody body there is a lot of interest in this so look at this 826 if
i touch on that look at that loan down 200 of my shares of beachbody i earned 21 cents in interest
that one day if they're not loaning anything out you can see there's a gap between 822 and 826
that means you're not making money they're not making money there's nothing on loan
whatever it is what it is and then that 2.91 cents that just gets dumped into your
cash account within your asset portfolio on the weibo app and then it's up to you
you can withdraw that if you want to or you can use it to invest in more shares of stock if you're
not part of and you're still watching this video by the way make sure you get your two free stocks
simply just for signing up and for depositing your first 100 that you can trade in the stock market
link in the description now let's talk about why this would happen why are you making money on this
what is the point of all this well let's talk a little bit about what short selling really means
so the goal of the short seller is their goal is they want that stock price to go down and if
the stock price goes down they can make some money and that's ultimately what weibo is doing they're
lending them shares they don't own so that they can sell them and then eventually buy back and
keep the profit let me write this down so you can see a little bit of an example so we have
let's say we're going to sell short okay get get excited for this handwriting get excited guys
all right so we have let's say 50 shares okay this is shares this is going to be money
and this is going to be the total column okay so there we go all right so we got 50 shares at
let's say right now it's going for 100 a share okay that's what it's going for right now which
means the total value of the 50 shares is 5 000 that's easily 50 shares times 100. so let's say
you have 50 shares a company abc and then the short seller says hey weevil i'd like to short
sell 50 shares and that's exactly what happens here they're going to loan out your shares to this
person they're going to do this they're gonna have to pay some interest because they're doing this
okay but not only weeble but you'll get a little bit of money as a result so what they want is
they want this price to go down the goal here is this 100 they want that dropping down to let's say
50 bucks that would be ideal okay if this goes down to 50 dollars they can then buy back
the 50 shares which means that that's good they can basically buy back the shares and say weeble
i satisfied what i needed here's the 50 shares back and i'm out of the game but look what
happens because they're buying back at only 50 the total was now 2 500 check that out so guess what
that means that means the difference between the two of these twenty five hundred dollars
so they sold fifty shares they earned five thousand dollars
they then said oh the price dropped i'm gonna buy back the shares i'm going to now have a
difference of twenty five hundred dollars because i only need to give weeble back five thousand to
satisfy the 50 i borrowed and then i get to keep the 2500 minus the interest expense so let's say
it was about an eight percent interest charge for them to borrow this amount of money that
would be 400 so they got to take out 400 because they obviously got to pay for the use of what
they did here so that means that the total amount that the short seller is going to profit is 2 100
and i'm going to make this green and go cha ching check that out so that's what happens now that
four hundred dollars they're gonna pass on to you fifteen percent of that four hundred dollars
and that's what would ultimately happen in this case now you may remember the talk about gamestop
and amc and things like that well what happens is if the price goes up this gets very dangerous
so be careful if you're thinking hey what if i could do this and make some extra money
that was an easy 2100 that he laid out here don't let this little writing of chicken scratch
throw you off i gotta throw out a big warning here because if you go into this let's say that
all of a sudden wall street bets in the case of gamestop starts buying up all these shares or the
company comes out with a huge announcement also sending their share price up well this 100 per
share what happens if that goes up to 200 okay so this is now 200 i've made a mess out of this but
what you have to decide now as a short seller is do i pray to god that by the time the company
needs their money back that this will drop back down below 100 and i can make some money
if it doesn't i have to cut my losses and basically go into this thing and buy back the
shares at a higher price than what i sold it i'm putting up my own money to make this happen yikes
and that's what happens now all these hedge funds all these guys we're talking piddly change
here they're they're transacting millions of dollars and because they're doing that
they end up saying hey i need to dump more money which actually pushes that stock price higher
and higher and higher and before you know it we have what we call a short squeeze now you might be
asking well how would i short a stock on weibo if i wanted to do that again remember my warning it's
a very scary thing but if you wanted to if a stock is eligible to be shorted you will know it is
when you see this icon in your weeble app so once you see that that means that stock can be shorted
and here's exactly how it works you select how many shares you want to short and then you simply
select the short option at that point you can then execute the trade but keep in mind you're now the
one paying interest because you're basically borrowing funds from the brokerage on margin
which means you're going to have to pay back more money in interest but your goal would be that the
price will go down and you can ultimately buy back shares for less money and pocket the difference
and get to keep that extra money but again that has unlimited lost potential brokerage can
institute what they call a margin call if a margin call happens you're in deep crap that means we
want our money back and we want it back now figure it out scary stuff the best thing you could do
if you want to make an extra buck is turn on the stock lending program but there's a little bit
of a warning as i promised you let's talk about this there's two things that you need to keep in
mind whether you should keep this on or if you're enrolled and you don't want to be you can unenroll
from this program now the interest as you can see in my example can range greatly it depends on the
short interest of the particular stocks that you own you're not going to be a millionaire
overnight this is not going to make you wealthy you could make more on dividends than you could
potentially with this program so just keep that in mind as your first point but the bigger warning is
there is a problem sometimes when it comes down to dividends if you are lending out stocks that
typically pay a dividend to short sellers through this program you may not get the qualified
dividend you may instead get what they call cash in lieu and cash in lieu basically means because
your shares are loaned down you're not going to qualify for the tax benefit of a qualified
dividend instead you get this extra cash in lieu so you got to be careful that especially if you
own a ton of shares and you get a lot of dividend income what you need to do is check with your
favorite cpa make sure your taxes are in order now this could not really matter to a lot of people
but if you're somebody that gets a ton of dividend income if you're a huge dividend investor you get
a lot invested and you're making thousands upon thousands upon thousands of dollars every year
that that could mess up your tax that's something you got to check into if you're participating in
the stock lending program now make sure you check out these two videos next make sure
you subscribe if you like more and until next time we'll see you on the next video