Interactive Brokers True Cost of Shorting

[traider]

Read this on quora, can anyone confirm it's correct?

The stock price is $22.87, and has a fee rate of 3.71% and a rebate rate of -3.31%. The broker is Interactive Brokers.

If I were to short, say, 1000 shares, how much would I actually pay (disregarding slippage and commissions) for the privilege of shorting, and what is my payment schedules?

ANS:

If you are selling short, you will be charged 3.71% annually (calculated every day based on currrent stock price).

If you are long shares and broker decides to use your shares for selling them short and if you participate in additional stock yield program - you will be paid 3.31% annually.

Interest rate in question can change daily based on how high is demand for selling those stocks short. Also if broker runs out of long positions in other accounts, your position can be force closed.

 

[Shadetree42]

That sounds about right. Be aware that share prices are always rounded up ($22.01 becomes $23) for the notional loan amount calc., and that interest accrues 365 days a year (you are charged on non-trading days). You will be charged for short positions daily and they will show up in your detailed daily statement.

 

[Shadetree42]

In your example, you should be charged $2.34 per calendar day. 23*1000*0.0371/365

 

[HobbyTrading]

If you are selling short, you will be charged 3.71% annually (calculated every day based on currrent stock price).

If you open this short position on margin then you also have to pay interest over the debt.

 

[blueraincap]

If you open this short position on margin then you also have to pay interest over the debt.

never really thought much about this, is this really the case?
why there is a "borrowing" to pay for in case of shorts?

 

[Sig]

Read this on quora, can anyone confirm it's correct?

The stock price is $22.87, and has a fee rate of 3.71% and a rebate rate of -3.31%. The broker is Interactive Brokers.

If I were to short, say, 1000 shares, how much would I actually pay (disregarding slippage and commissions) for the privilege of shorting, and what is my payment schedules?

ANS:

If you are selling short, you will be charged 3.71% annually (calculated every day based on currrent stock price).

If you are long shares and broker decides to use your shares for selling them short and if you participate in additional stock yield program - you will be paid 3.31% annually.

Interest rate in question can change daily based on how high is demand for selling those stocks short. Also if broker runs out of long positions in other accounts, your position can be force closed.

The amount you'll get paid if you lend is most definitely not correct. IB keeps half the amount, plus there's no way to really ensure your stock is lent now that they shut down the marketplace where you could lend.

 

[zdreg]

never really thought much about this, is this really the case?
why there is a "borrowing" to pay for in case of shorts?

there is a borrowing cost for difficult but not impossible to borrow because the people loaning the shares are demanding a fee. there are no fees for easy to borrow.e,g apple , msft.
in general brokers do not shares fees received with their retail customers. exceptions are for hedge funds etc.

 

[HobbyTrading]

never really thought much about this, is this really the case?
why there is a "borrowing" to pay for in case of shorts?

If you want to short sell stock you need to borrow the stock from someone who has these stock. You pay a fee to the stock owner.
If you don't have enough cash, and have a margin account, you borrow money from your broker and need to pay debit interest to your broker.

 

[zdreg]

If you want to short sell stock you need to borrow the stock from someone who has these stock. You pay a fee to the stock owner.
If you don't have enough cash, and have a margin account, you borrow money from your broker and need to pay debit interest to your broker.

incorrect.
short sales create credit balances. i suggest before posting amateurish information suitable for yahoo finance that you bone up on the mechanics of short selling.

 

[blueraincap]

incorrect.
short sales create credit balances. i suggest before posting amateurish information suitable for yahoo finance that you bone up on the mechanics of short selling.

I agree. It seems that you are confused about the basics of shorting vs margining. You need a margin account to short, but shorting over your deposit has nothing to do with margin interest. It is amazing how you comment without knowing the very basics