By Elinor Comlay and Dan Wilchins

NEW YORK, April 17 (Reuters) - A popular trade involving Citigroup shares could yield fat profits after the bank said on Friday it is not changing terms of a preferred share exchange, but new investors could struggle to get a piece of the action.

The trade involves buying Citi preferred stock and simultaneously selling borrowed shares of common stock (C.N: Quote, Profile, Research), known as short-selling.

The preferred shares can be converted into common stock in a few weeks, meaning they can effectively be used to buy Citigroup shares at a much lower price than the level at which they can be sold now, potentially yielding a 200 percent profit.

Getting into the trade now is difficult, because borrowing Citigroup shares to sell them short is so expensive.

The cost of borrowing Citi shares until mid-June, as implied by the options market, went from roughly 5 percent in early March to about 25 percent now because of the increase in demand, analysts said.

Citigroup said in February it would begin exchanging up to $52.5 billon of preferred shares for common shares in the beginning of April. As early April turned into mid-April, many investors feared the terms of the deal would be changed, or the transaction would be delayed for a long period of time, or even canceled altogether.

But Chief Financial Officer Ned Kelly said on Friday the exchange is going to go through on previously described terms, after the government finishes its stress test of the bank.

When asked on a conference call if there was any chance of the offer being canceled, Kelly said, "I think there's a 5 percent chance the sun doesn't come up but the short answer is no."