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How to buy T-bills on IB?
- Thread starter Daal
- Start date
You buy stock with cash, simultaneously selling a futures contract against the stock. The futures trade higher than the underlying to account for dividends and carry. You make the price difference as synthetic interest. Pretty close to LIBOR rate. There is a ET thread on this somewhere that has more info.
Traveler
Traveler
Quote from Traveler:
You buy stock with cash, simultaneously selling a futures contract against the stock. The futures trade higher than the underlying to account for dividends and carry. You make the price difference as synthetic interest. Pretty close to LIBOR rate. There is a ET thread on this somewhere that has more info.
Traveler
That's right. However a synthetic trade carries costs that far exceed the potential accrued interest, ie comms and especially slippage. You won't be able to get in and out of the position without enduring 1% costs and that's pretty what you'll earn over 3 months or so. Even you'd place the trade for 12 months, the future contract will carry a much wider b/a spread and thus you will eventually end up pretty much where you began in the first place.
turbowagon
Guest
Can the person who seems to work at IB please provide the means by which an account in the range of 10-60K earn an interest on unused margin similar to T-Bill rate? Thanks.
With 60K (USD) in the account you'ld be earning (LIBOR - 0.5%) on 50K, if
it's all in cash, and you just let it sit at IB. There's no interest on the first 10K.
One possibility, if you're going to be inactive for a reasonably long time,
might be to do an ACH transfer of your excess funds to a bank account, and
then use Treasury Direct to buy T-bills.
I think the first withdrawal each month is free, and subsequent withdrawals
cost 1.00 each. Haven't tried actually doing this, though, so check it out first.
Whether this would be worth it would clearly depend on what your bank charges for an
EFT too, as well as the time period and amounts in question.
it's all in cash, and you just let it sit at IB. There's no interest on the first 10K.
One possibility, if you're going to be inactive for a reasonably long time,
might be to do an ACH transfer of your excess funds to a bank account, and
then use Treasury Direct to buy T-bills.
I think the first withdrawal each month is free, and subsequent withdrawals
cost 1.00 each. Haven't tried actually doing this, though, so check it out first.
Whether this would be worth it would clearly depend on what your bank charges for an
EFT too, as well as the time period and amounts in question.
Just buy SHY at market. It's a great place to park cash at reasonable short term rates and its marginable at 30% and ultra safe.
It's an excellent alternative to parking it in MM accounts that take 30 days to qualify/mature for margin credit. For that reason I use a tiered cash system at Fidelity and feed money in and out of a core low interest bearing account to Cash Reserves (FDRXX) which is currently right at 5% interest. When I get too much in core (not marginable) I shuttle it into SHY (Short Term Treasuries and marginable) when I need to pump up margin minimums. Cash management can be a lot of work for active traders but I find this to be a pretty good way to earn descent interest on idle cash while being able to use it to meet house minimums for large ETF option spreads etc.
TS
It's an excellent alternative to parking it in MM accounts that take 30 days to qualify/mature for margin credit. For that reason I use a tiered cash system at Fidelity and feed money in and out of a core low interest bearing account to Cash Reserves (FDRXX) which is currently right at 5% interest. When I get too much in core (not marginable) I shuttle it into SHY (Short Term Treasuries and marginable) when I need to pump up margin minimums. Cash management can be a lot of work for active traders but I find this to be a pretty good way to earn descent interest on idle cash while being able to use it to meet house minimums for large ETF option spreads etc.
TS