Stock lending is when someone who has free trading stocks wants to borrow money and use the shares as collateral for the loan. When a shareholder wants to access the equity in his stock position, he basically has three options. He can sell his stock and turn the shares into cash or he can use the stock as collateral for a loan. If he chooses to use his stocks as collateral, he can take out a margin loan or a non-recourse stock loan. If an investor thinks the stock is going to go down, they will sell the position to generate cash. If they remain bullish on the stock, they will look to borrow so they can gain access to the equity while still receive dividends and participate in the capital appreciation.
