The wit, wisdom, zen, and philosophy of Paul Diamond Blow.

Robinhood's Stock Lending Program is a Rip-off! Here's Why!
I tried Robinhood's stock lending program for two months. How much did I earn? The results will SHOCK you!

by Paul Diamond Blow

I've been using Robinhood for stock trading since 2017 and I generally like it. Robinhood was the FIRST stock trading platform to have NO FEES for trading stocks, which is why I signed on originally. Since then, all the major players now have no trading fees, but I've stuck with Robinhood for half my stock portfolio (I use eTrade for the other half) and my Robinhood portfolio consists mostly of bio-chem stocks. Over the years Robinhood has added new features to their platform and sometime in 2022 or so they introduced their stock lending program, in which you can earn passive income by letting Robinhood loan out the shares you own to short sellers.

How Stock Lending Works

Short sellers -- if you didn't know -- make money when stocks GO DOWN in price. They generally do not BUY any stocks, but they get them on LOAN from brokerages (such as Robinhood) and pay interest on the shares they have loaned. Generally, short sellers (or "shorts" as they are called) will sell the shares they have on loan, then hope to buy them back at a lower price. If successful, they then return the loaned shares to the brokerage and keep whatever profit they made by selling high and buying back low. For example, if a short seller gets 1000 shares of AUPH stock on loan and sells at nine dollars a share, and then buys the shares back at eight dollars a share, they make a profit of one dollar per share, or $1000. Short sellers try to bring the stock price DOWN, which typically is not in your best interest if you own these stocks. But, if you participate in the stock lending program, you can get paid some of the interest that your loaned out shares are earning.

My Results With Robinhood's Stock Lending Program

I first signed up for Robinhood's stock lending program shortly after it was introduced in 2022, but they never loaned out any of my shares -- they said I was tagged as a "daytrader" due to my trading patterns (not true: I am actually a SWING trader) and day traders are not allowed to participate in their stock lending program. However, things changed in October 2023, when suddenly Robinhood started loaning out my shares. Robinhood does NOT let you choose which stocks get loaned out, or limit the number of shares that get loaned out. If you enable stock lending they will loan out any of your stocks and any amount that they can.

My Robinhood stock lending earnings for two months -- ten cents!

October 2023 Results

At the beginning of October 2023 I owned roughly 3200 shares of AUPH stock (An $8-9 stock), 300 shares of BCRX (a $5-6 stock), and 50 shares of RMBL stock (a $5-6 stock). The number of shares I own fluctuated throughout the month, but Robinhood loaned out on average 3000 shares of AUPH, 150 shares of BCRX, and 40 shares of RMBL throughout the month.

In early November I received my first stock lending interest payment for the month of October -- a whopping THREE CENTS! That is right, I earned just one penny on 3000 shares of AUPH, one penny on 150 shares of BCRX, and one more penny for 40 shares of RMBL! Un-freaking-believable! I was HIGHLY DISAPPOINTED to say the least. I thought maybe it was a fluke, and decided to give Robinhood's stock lending program one more month...

At the end of November I still had these shares loaned out

November 2023 Results

Throughout the month of November 2023, I owned roughly 3100 shares of AUPH stock, 300 shares of BCRX, 50 shares of BLU, and 50-100 shares of RMBL stock. Robinhood again loaned out the majority of my AUPH shares throughout the month (2500-3000 shares), 50-100 shares of BCRX, 30 shares of BLU, and 40-50 shares of RMBL throughout the month.

In early December I received my stock lending interest payment for November. It was an improvement over October's payment -- a whopping SEVEN CENTS total. Un-freaking-believable. This time, all my AUPH shares earned me another penny, BCRX earned me a penny, BLU earned me a penny, and RMBL earned me four cents! Interesting how 50 shares of RMBL earned me 4x the amount that 3000 shares of AUPH paid. UN-FREAKING-BELIEVEABLE. Needless to say, I was disgusted with Robinhood's payouts for their stock lending program at this point and I immediately un-enabled it.

In November 3000 shares of AUPH earned me a lousy penny!150 shares of BCRX paid another penny. SAD.

Interestly enough, in October 2023 Robinhood also started paying me interest on my uninvested cash at the rate of 1.5% (which they had NEVER done before). Throughout October and November I had roughly $5000 of uninvested cash that paid me $11 in interest. Compare that to the lousy TEN CENTS Robinhood paid me for loaning out $25,000 worth of shares. UN-FREAKING-BELIEVABLE.

By comparison, I earned $11 in interest on my uninvested cash

Robinhood does NOT tell you how much interest they are charging the short sellers for these shares, but the interest rate on each stock will be different depending on the demand for those shares. But how can Robinhood only pay me TWO CENTS for $25,000 worth of AUPH shares over the course of two months? My guess is that Robinhood earned at least $50 (probably more) on those loaned out shares, and it is AN ABSOLUTE INSULT that they only paid me two cents.

Final Words

If you are considering joining Robinhood's stock lending program to earn some passive income on your stock shares -- DO NOT BOTHER. It is a rip-off plain and simple. Robinhood takes all the profits and pays out pennies, and the short sellers are constantly trying to bring down the stock prices, so it is definately NOT in your best interest. AVOID Robinhood's stock lending program like the plague.