# Borrow fee > The annualized interest rate a short seller pays to borrow shares, charged daily and rising sharply when shares are scarce. Source: https://www.quantisnow.com/glossary/borrow-fee Topic: Glossary / Short selling Also known as: stock borrow fee, stock loan fee, cost to borrow, borrow rate Last updated: 2026-10-27 A borrow fee is the cost a short seller pays to borrow shares, expressed as an annualized percentage of the position's value and typically charged daily for as long as the short is open. It is set by supply and demand in the securities lending market. ## How it works When a trader sells short, the broker borrows the shares from its own inventory, other customers' margin accounts or institutional lenders such as funds and custodians. The lender earns a fee, and the broker passes that cost, plus a markup, to the short seller. - **Easy-to-borrow stocks** (large, liquid names with plenty of lendable shares) carry fees well under 1% a year. - **[Hard-to-borrow](https://www.quantisnow.com/glossary/hard-to-borrow) stocks** can carry fees of 20%, 50%, or even several hundred percent a year when lendable supply runs out. Rates are not locked. Brokers can raise them daily, and the fee is usually charged on the current market value of the shorted shares, so it grows as the stock rises. ## Why it matters for traders The borrow fee is a direct cost that eats into a short seller's return, and a very high fee forces shorts to be right quickly. For other traders, it is a signal: a rapidly rising borrow fee shows demand to short is outstripping supply, which often accompanies high [short interest](https://www.quantisnow.com/glossary/short-interest) and is one ingredient traders watch for in potential [short squeeze](https://www.quantisnow.com/glossary/short-squeeze) setups. Borrow costs also leak into options prices. When shares are expensive to borrow, puts tend to be priced higher relative to calls. ## Example A trader shorts 1,000 shares of Northwind Therapeutics (NWTX) at $20, a $20,000 position, with a borrow fee of 36% a year. - Annual cost: $20,000 x 36% = $7,200 - Daily cost: about $7,200 / 365 = $19.73 Over 30 days the fee totals roughly $590. If NWTX rises to $25, the same rate applied to the larger $25,000 position costs about $24.66 a day. The trader needs the stock to fall about 3% a month just to cover borrowing costs. ## FAQ ### Do you pay a borrow fee on every short sale? Generally yes, though for easy-to-borrow stocks the fee can be so small that some brokers do not itemize it. ### Why do borrow fees change? They move with supply and demand for lendable shares. A surge in short selling, a lender recalling shares or a corporate event like a vote can all push fees up quickly. ## Related terms - [Hard to borrow](https://www.quantisnow.com/glossary/hard-to-borrow.md): A stock with little lendable supply relative to short-selling demand, which brings high borrow fees and possible limits on new short sales. - [Short selling](https://www.quantisnow.com/glossary/short-selling.md): Selling borrowed shares in the hope of buying them back later at a lower price, profiting from a decline in the stock. - [Short interest](https://www.quantisnow.com/glossary/short-interest.md): The total number of a company's shares that have been sold short and not yet covered, reported by brokers to FINRA twice a month. - [Short squeeze](https://www.quantisnow.com/glossary/short-squeeze.md): A rapid price rise driven by short sellers buying back shares to limit losses, which pushes the price higher and forces more covering. - [Days to cover (short interest ratio)](https://www.quantisnow.com/glossary/days-to-cover.md): Short interest divided by average daily trading volume, estimating how many days it would take short sellers to buy back all their shares. ## On Quantisnow - [Short volume vs short interest](https://www.quantisnow.com/guides/short-volume-vs-short-interest) - [Short volume screener](https://www.quantisnow.com/screener/short-volume) - [Days to cover calculator](https://www.quantisnow.com/tools/days-to-cover-calculator)