Margin Interest on Short Positions
- Thread starter Miragers
- Start date
If your broker charges you interest on a short position, get a new broker. Short proceeds are a credit, not a debit. Who charges interest on a credit balance?
If you're lucky, your broker will pay you interest on your short proceeds. Probably not much, though. IB pays some interest on short balances over $100k.
Martin
If you're lucky, your broker will pay you interest on your short proceeds. Probably not much, though. IB pays some interest on short balances over $100k.
Martin
So, for an account with $1 million in total equity, long positions totaling $1 million, and short positions totaling $1 million (assume the shorts are not hard to borrow), would IB pay a net interest on $900K, with no offsetting interest expenses? That would be my understanding, but someone told me differently (that IB would charge an interest expense on $1 million ($2 million in total long + short positions less $1 million in account equity), and then subsequently credit the account with interest proceeds on the $1 million short. I'm fairly certain that IB would not charge any interest expense but I was hoping someone knew for sure.
It is worth noting how IB calculates short interests earned.
If I'm correct, IB use pro-rate to calculate all sorts of things.
If you short for $110k:
- For the first $100k, you get ABSOLUTELY no interest
- ONLY the rest $10k receives interest. Urgh!
Too bad!Details:
http://www.interactivebrokers.com/en/accounts/fees/interestMethods.php?ib_entity=llc
See Example 5 at:
http://www.interactivebrokers.com/en/accounts/fees/interestMethods.php?ib_entity=llc
You should find your answer.
Wrong, wrong, wrong.
This is all on IB's web site, explained in painfully complete detail.
http://www.interactivebrokers.com/en/accounts/fees/interest.php
http://www.interactivebrokers.com/en/accounts/fees/interestMethods.php
IB pays interest on cash balances over $10k <i>excluding</i> short proceeds. Short proceeds earn lower interest rates and they only earn interest on balances over $100k.
There is no broker anywhere that will net your short and long positions for interest purposes. Short balances are always paid interest at lower rates than long balances. In fact, you're lucky to earn any interest at all on short proceeds.
Martin
Martin .... thnx for the correction re shrt cash interest. During the Jan to March period i carried shrt positions often overnite. IB made interest payments each day on my total cash bal. That was
very nice indeed!!! I wonder if they made a mistake. The interest on cash bal explanation from the link you posted is much more
detailed than what i read months ago.
I should have chked up with IB before i said anything here.
My mistake. Arrggh!
Again, thanks for the correction.
... rj