can i use proceeds from short position to buy treasury bill?

[trend2009]

let's say I short 1000 shares of spy, my position is -1000 shares+320K cash. can I use 320K cash to buy bonds? the bond rate is 2%, the borrow rate of spy is 0.25%. any other hidden fees?

 

[bone]

let's say I short 1000 shares of spy, my position is -1000 shares+320K cash. can I use 320K cash to buy bonds? the bond rate is 2%, the borrow rate of spy is 0.25%. any other hidden fees?

AFAIK you would have to close out your short position first and “realize” your profit before you used the entire profit to purchase bonds.

I used to keep T-Bills in my futures account - but it comprised one half of my account equity.

 

[trend2009]

AFAIK you would have to close out your short position first and “realize” your profit before you used the entire profit to purchase bonds.

why do i have to close out short position first? the treasury bill has zero risk.

 

[bone]

why do i have to close out short position first? the treasury bill has zero risk.

Call IB or TD Ameritrade and ask. You’ll typically require some amount of cash liquidity to maintain margin for a substantial open position.

 

[Snuskpelle]

why do i have to close out short position first? the treasury bill has zero risk.

More than zero margin however so likely broker does not agree about zero risk. (Hint: It does not have zero risk if it needs to be liquidated before expiry since the price varies all the time.)

 

[bone]

why do i have to close out short position first? the treasury bill has zero risk.

I called a broker to check and the answer is no if you keep your open short position. The proceeds of the sale of short stock do not belong to the client and is collateral for the shares lent out to make delivery to the buyer. The clearing firm can and does earn interest on some of those funds by doing repos.

 

[trend2009]

I called a broker to check and the answer is no if you keep your open short position. The proceeds of the sale of short stock do not belong to the client and is collateral for the shares lent out to make delivery to the buyer. The clearing firm can and does earn interest on some of those funds by doing repos.

thank you. that is too bad, and unfair to the trader.

 

[bone]

thank you. that is too bad, and unfair to the trader.

And you’re living in a fantasy world if you think that a short position never marks against you - requiring more margin. And in the world of commission-free trades of course brokers are going to try to make a very modest amount of money loaning out customer funds in the Repo market.

 

[zdreg]

I called a broker to check and the answer is no

I called a broker to check and the answer is no if you keep your open short position. The proceeds of the sale of short stock do not belong to the client and is collateral for the shares lent out to make delivery to the buyer. The clearing firm can and does earn interest on some of those funds by doing repos.

You should have known that answer without calling a broker.
Depending on the size of your account there are a very few brokers who will share the interest with you. In addition, if you are charged a fee for locate on a hard to borrow security, the contra party, the lender of the security, will receive part of fee. In this case also unless you are a hedge fund etc. the broker will keep the fee for themselves.

Short selling in itself is not shady, but the way stock loan departments operate would make mafia loan sharks feel they are in a comfortable milieu.

 

[bone]

I trade futures and the OP specified a short SPY position. Nothing wrong with being certain in a post.

You should have known that answer without calling a broker.
Depending on the size of your account there are a very few brokers who will share the interest with you. In addition if you are charged a fee for locate on a hard to borrow security the contra party, the lender of the security will receive part of fee. In this case also unless you are a hedge fee the broker will keep the fee for themselves.

Short selling in itself is not shady but the way stock loan departments operate would make mafia loan sharks feel they are in a comfortable milieu.