Trading term

What is Borrow fee?

The borrow fee is what a short seller pays to rent the shares they've borrowed, quoted as an annual rate on the value of the position and charged for every day the short is held. An easy-to-borrow stock might cost a fraction of a percent a year; a hard-to-borrow one can cost many times that.

Borrowing shares isn't free. Your broker quotes the borrow fee as an annualised percentage of the borrowed stock's current value, then charges it daily for as long as you keep the short position open. A large, liquid stock with plenty of shares sitting in lendable accounts might cost around 0.3% a year. A stock that's hard to borrow — because few holders are willing to lend it out, or too many traders want to short it at once — can cost many times that, sometimes tens of percent a year.

The fee isn't fixed for the life of the trade, either. Brokers reprice it, and it tends to rise right when a short idea starts working and more traders pile into the same trade. It's also charged on the whole value of the position you're short, not on the smaller margin deposit you put up yourself — so it's a bigger drag on your actual stake than the headline rate suggests.

For example

An $8,000 short at a 3%-a-year borrow fee costs about $240 a year, or roughly $20 a month, for as long as the position stays open. A hard-to-borrow name at 30% a year costs $2,400 a year on the same $8,000 position — ten times the rent for the identical trade.

Go hands-on in Premium

That's Borrow fee in theory — it clicks when you read it on a live chart. Practise it hands-on in the TradeWize Premium Futures & Derivatives track.

Explore Premium →

Why it matters to you

A long position costs nothing to hold; a short position has a meter running the entire time. The borrow fee is a real, recurring cost that erodes a short even while the price is doing nothing, which is why waiting is expensive for a short seller in a way it isn't for a buyer.

⚠ It's charged on the position, not on your margin

It's easy to see a rate like 3% and assume it's a small cost against the $4,000 you put up. It isn't — the fee is calculated on the full value of the shares you borrowed, which is typically double your margin deposit or more. A rate that sounds modest can still be a meaningful percentage of your own stake.

Frequently asked questions

What is a borrow fee in short selling?

It's the rent a short seller pays for borrowing shares, quoted as an annual percentage rate on the value of the borrowed stock and charged daily for as long as the short position stays open.

How much does it cost to borrow shares?

It varies enormously. An easy-to-borrow stock might run around 0.3% a year; a hard-to-borrow one can run into tens of percent a year. On an $8,000 position at 3% a year, that's about $240 a year, roughly $20 a month.

Can the borrow fee change while you're in the trade?

Yes. Your broker can reprice it daily, and it often rises right as a stock gets more crowded on the short side — which can be exactly when your idea is starting to work.

Is the borrow fee the same as margin interest?

No. The borrow fee is rent on the borrowed shares themselves. Margin interest is a separate cost that only applies if you borrow cash — for example, to meet a margin call with a loan from your broker.

Read the full guide

DerivativesWhat Is Short Selling? How to Bet on a Stock FallingShort selling means borrowing shares, selling them, and buying them back cheaper. How the borrow works, what it costs, and why the loss has no ceiling.14 min read

Related terms

BackwardationBackwardation is when futures prices are lower for later delivery dates — the futures curve slopes downward. It often signals tight near-term supply or strong demand for immediate delivery. For futures holders it creates a positive 'roll yield,' as they sell pricier near-term contracts and buy cheaper later ones.BasisBasis is the difference between an asset's futures price and its current spot (cash) price. It reflects carrying costs, supply and demand, and time to expiry — and it converges to zero as the contract nears expiration, since a future about to settle must match the spot price. Traders watch basis to gauge conditions and to hedge.CFD (contract for difference)A CFD (contract for difference) is a derivative where you and a broker agree to exchange the difference in an asset's price between opening and closing the trade. You never own the underlying — you simply profit or lose on the price move, with leverage. CFDs cover stocks, indexes, commodities and crypto, and are popular outside the US, where they're banned.ContangoContango is when futures prices are higher for later delivery dates — the futures curve slopes upward. It usually reflects the costs of storing and financing an asset until delivery. Contango creates a 'roll cost' for anyone holding futures over time, as they repeatedly sell cheaper near-term contracts and buy pricier later ones.
← Back to the full glossary