Share leasing: what it is and what precautions to take with the strategy

Stock leasing transactions are more complex, requiring a higher level of experience from investors

Stock trading is not just about buying and selling. One way to try and win in this market is to rent shares.

“Share leasing is a transaction in which one investor, also called a donor, lends his shares to another investor, called a borrower, for a period of time. In exchange for this loan, the lender will receive compensation from the borrower, known as the rent,” explained Carlos André Vieira, chief analyst at the analysis house TC.

Understand how it works, with the explanation of the specialist.

How does stock leasing work?

The borrower aims to make a financial gain on the leased share, either through its appreciation or by selling it short, also known by the term “short” where the borrower will make a financial return if the share depreciates.

On the other side of the deal, the donor also hopes to get income through the lease of this property. It has the guarantee that the asset will be returned at the end of the contract, since the brokerage company requires certain guarantees from the borrower so that it can consolidate this operation. The intermediation between the donor and the borrower is done by a stockbroker.

According to Vieira, the leasing of shares can give important signals regarding that asset that has a higher rental volume than normal. For example, if the asset’s rent has increased significantly, it is possible that some investors have increased negative outlooks on that asset, due to signals such as a bad financial result or some major news that should affect the asset’s price. that asset.

What precautions should be taken when renting shares?

The operations of leasing shares, or any other asset, are more complex operations, which require a much higher level of experience on the part of investors and people interested in carrying out this type of operation, highlighted Carlos Vieira.

Source: Terra

Rose

Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.