Webull Stock Lending Program - Extra Money or Sketchy Tax Bill? - YouTube

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