IB no interest on first 10K rule, what do you do with the money?

I'm trying to figure something out: I use my IB account almost exclusively for futures, mainly spreads. I rarely ever use more than 25% of equity for margin. Can I park all my cash in a high-yielding EFP and use it for margin?
 
Quote from jimbohanna:

I'm trying to figure something out: I use my IB account almost exclusively for futures, mainly spreads. I rarely ever use more than 25% of equity for margin. Can I park all my cash in a high-yielding EFP and use it for margin?
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You can buy ie. Vanguard Short-Term Bond ETF or equivalent.

If you have reg T margin you get 66,6 % margin value for those securities. Portfolio margin should be much higher.
 
This is only a factor if you have 10k in your account and only do daytrades. If you tie up the 10k in an ETF and want to hold a trade overnight you will pay margin interest that is much higher than the interest earned on the ETF.
 
Who uses all the margin all the time overnight? Most traders want to have a lot of extra margin.

You pay interest only for the margin you use which is usually much lower than available margin.

With EFT you get interest for all the money.
 
Quote from jimbohanna:

I'm trying to figure something out: I use my IB account almost exclusively for futures, mainly spreads. I rarely ever use more than 25% of equity for margin. Can I park all my cash in a high-yielding EFP and use it for margin?
More...

Yes. Hypothetical example:

$100,001 account with $100,001 cash balance.
GOOG at $500. Sell 2 July GOOG EFPs(100k worth). Yield 5.40%. Total commission $1.

Available buying power after the trade will be $80k. You can daytrade stock or swing futures up to that 80k limit w/o incurring debit interest.

To answer OP's question, the EFP will allow you to earn interest on the first 10k in your account.

You can accomplish the same keeping your cash in liquid conversions as per atticus's rec under a PM based account. However, commission costs would be much higher. Either way, the benefits are slightly higher yield than what ib pays and moving profits over to the cap gains tax line.
 
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