(a) I haven't been on ET very often since then; (b) it took me most of that time to develop a profitable methodology and therefore feel like I know what I'm talking about; (c) this particular topic struck me as one where I had some knowledge worth sharing - my understanding of IB's buy-in system came with some pain, which I hope to help others avoid; and (d) unlike many people on ET I generally speak only when I have something to say.
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Short forced buy-in ... just re-short?
- Thread starter heech
- Start date
Good points Sleuth. Is my math close to being correct.
For a 20% overnight holding charge I would assume this is an annual rate so dividing it by 365 days and then multiplying that number by $1000 you get 54 cents.
So for each $1000 of shorted stock held overnight you will get charged around 54 cents.
Is this in the ballpark?
For a 20% overnight holding charge I would assume this is an annual rate so dividing it by 365 days and then multiplying that number by $1000 you get 54 cents.
So for each $1000 of shorted stock held overnight you will get charged around 54 cents.
Is this in the ballpark?
Yes that's right. So, for instance, if you were short $100K for a month in a stock with a 20% borrowing fee, cost would be around $1650. Not necessarily a problem if your strategy is profitable enough, but definitely something to take into account.
IB doesn't itemize their interest charges, so the only thing you can know is the total amount you pay each day. If you have multiple short positions you can't really know what rate you're paying for each position.
IB doesn't itemize their interest charges, so the only thing you can know is the total amount you pay each day. If you have multiple short positions you can't really know what rate you're paying for each position.
Damn, that can be very expensive. I know that Tradestation does not impose this type of fee.
Another way to look at it is if you routinely have $100K short on average each night, it "could" cost you around $1650.
For those IB account holders, is their any list of stocks for which those fees will be imposed? At least that way you might be able to consider daytrading them only to reduce the impact of the fee.
Another way to look at it is if you routinely have $100K short on average each night, it "could" cost you around $1650.
For those IB account holders, is their any list of stocks for which those fees will be imposed? At least that way you might be able to consider daytrading them only to reduce the impact of the fee.
A 20% or higher borrowing fee is quite unusual, and would only be for very hard-to-borrow stocks that most brokers wouldn't allow you to short at all. With IB you can short almost anything (currently 8025 US stocks) but it might be expensive. You can see the current fee and 10-day history under Account Management -> Tools -> Short Stock Availability. For easy-to-borrow stocks like MSFT or CAT the borrowing rate varies from 0 to 0.12%. annually.
On the other hand, if you want to short Citigroup (C), you can do it but the borrowing fee is 108% right now, because you have to outbid all of the other would-be short sellers. I'd never pay that much, but if you're an expert in the stock and you're sure it's going down fast, you might be willing to pay that for the privilege of shorting it.
I believe that you only pay the borrowing fee if you hold overnight; I don't think you pay if you day-trade.
In more normal times IB pays you interest on short sale proceeds; right now the rate is 0%, but someday rates will rise which will help offset any borrowing fee or even pay you to hold a short position.
I don't have any problem with how IB handles this, with the exception that I'd like to see the borrowing fees itemized by position in their reports.
On the other hand, if you want to short Citigroup (C), you can do it but the borrowing fee is 108% right now, because you have to outbid all of the other would-be short sellers. I'd never pay that much, but if you're an expert in the stock and you're sure it's going down fast, you might be willing to pay that for the privilege of shorting it.
I believe that you only pay the borrowing fee if you hold overnight; I don't think you pay if you day-trade.
In more normal times IB pays you interest on short sale proceeds; right now the rate is 0%, but someday rates will rise which will help offset any borrowing fee or even pay you to hold a short position.
I don't have any problem with how IB handles this, with the exception that I'd like to see the borrowing fees itemized by position in their reports.