Hard to borrow stocks that are sold short are charged a hard to borrow fee which accrues daily. The calculation for the hard to borrow fee is shown below.
Hard-to-Borrow Fee Calculation:
Current price of stock = $13.00
Number of shares sold short = 1,000
Hard-to-borrow rate = 6%
Current industry convention = 1.02
* The current industry convention percentage set by the securities lending market participants is subject to change.
(Market Price of Stock) x (1.02) = Per Share Collateral Amount (rounded up to the nearest dollar)$13.00 x 1.02 = $13.26 = $14.00
(Per Share Collateral Amount) x (Share Quantity) = Trade Value$14.00 x 1,000 = $14,000
(Trade Value) x (Annual Hard-to-Borrow Rate) = Annual Hard-to-Borrow Fee $14,000 x 0.06 = $840
(Annual Hard-to-Borrow Fee) / (360 days) = Daily Hard-to-Borrow Fee $840 / 360 = $2.33 Daily Hard-to-Borrow Fee
Please note that the hard to borrow rate changes daily so the fee will vary each day.