IB short sell interest rate is based on daily latest % and only count the whole number price unit?

G

GloriaBrown

This is what I understand so far, please correct me if I am wrong:

Let's say a stock short sell interest rate today in IB is 5%, IB calculates the short sell interest daily, the short sell interest for today would be 5%/365

Then tomorrow the interest rate goes up to 10%. The tomorrow interest cost becomes 10%/365

and this is true if I didn't close the short sell and hold for 2 days.

Another issue is if the stock is $0.1, IB actually counts it as $1, the whole number of it, to calculate the short sell rate, let's say for that day is 5%, the interest cost would be $1*5%/365 instead of $0.1%5%/365.

Am I correct?
 
In general, short stock fees are charged from settlement date to settlement date and the daily formula would be (Stock $ value)*(Short Stock rate)/365.

E.G. You short 1000 XYZ that closes at 20 with a neg rate of 5%. In three days you will see a charge for the first day of ~$2.74. ($20,000*5%/365).

Most firms follow the same procedure. On our website we display short rates as a fee per day/share, but math behind it is the same. You will also be charged for Saturday and Sunday if you hold over weekends. On Monday, you should see charges for three days including Friday.

I hope this helps.

Bob
 
Now with T+2, it makes sense to cover expensive stocks on wednesdays (for settlement on friday) in order to avoid weekend fees. Assuming no holidays
 
Yes, IB rounds up to the nearest dollar when calculating the amount subject to borrow fees. So a 10-cent stock with 10% borrow fee will actually incur an 100% annualized fee.
 
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