Short Selling Fees

C

cutetrader

Hello fellow traders,

I started to work on some of the short selling stratigies using Interactive Brokers. I am not able to clearly understand how much fee I need to pay them to hold positions overnight.

I am usually planning to hold a position for 5-10 Trading Days.

Example:
Ticker: INVN
Short Price: 8.40
Fee Rate: 0.95 %
Rebate Rate : -0.55%
Short Shares: 1000

I did the above trade today morning and plan to close in a 5 days. Can any one please explain me what would be my daily interest rate they charge to me?

I am afraid that I may pay more in interest+commissions than the profit I make from this.


Second Question:
If I day trade a Short position like SELL in the morning and BUY in afternoon or IN AFTER HOURS TRADING, will need to pay any additional fees or just get a free short ride?
 
The rate is an annualized rate, so you'd have to prorate the .95% to get your daily rate. You're only charged if you hold overnight. Keep in mind that the fee changes almost daily.
 
You can go to SLB Rates in TWS to see a chart of historical borrow fees.

To get your daily rate, convert from annualized, as Sig said. But also realize that borrow is charged on non-trading days -- so holding over the weekend is more costly than holding over a weeknight. Finally, IB rounds all share prices UP to the nearest dollar to calc. the notional amount that is subject to fee. Really sucks (and is downright sleazy lack of disclosure IMO) for low-priced stocks.

You can also run a daily statement and see the precise amount you were charged for a given day.

Not sure about the after-hours, but I think you would not get charged borrow in that case.
 
cutetrader said:
Hello fellow traders,

I started to work on some of the short selling stratigies using Interactive Brokers. I am not able to clearly understand how much fee I need to pay them to hold positions overnight.

I am usually planning to hold a position for 5-10 Trading Days.

Example:
Ticker: INVN
Short Price: 8.40
Fee Rate: 0.95 %
Rebate Rate : -0.55%
Short Shares: 1000

I did the above trade today morning and plan to close in a 5 days. Can any one please explain me what would be my daily interest rate they charge to me?

I am afraid that I may pay more in interest+commissions than the profit I make from this.


Second Question:
If I day trade a Short position like SELL in the morning and BUY in afternoon or IN AFTER HOURS TRADING, will need to pay any additional fees or just get a free short ride?
More...


With a holding time of only 5-10 days you wouldn't suffer too much time decay. You could buy ten put contracts and avoid the whole borrowing shares issue, however the spreads on these low priced options tend to be no smaller than with the higher priced stocks and can eat into your profits.
 
Shadetree42 said:
You can go to SLB Rates in TWS to see a chart of historical borrow fees.

To get your daily rate, convert from annualized, as Sig said. But also realize that borrow is charged on non-trading days -- so holding over the weekend is more costly than holding over a weeknight. Finally, IB rounds all share prices UP to the nearest dollar to calc. the notional amount that is subject to fee. Really sucks (and is downright sleazy lack of disclosure IMO) for low-priced stocks.

You can also run a daily statement and see the precise amount you were charged for a given day.

Not sure about the after-hours, but I think you would not get charged borrow in that case.
More...

Thank you for providing me an idea to find the daily interest charges on Report. I tried to run some reports and never saw this one? Do you happen to know which report I should be using to see this?

There are tons of report options available at IB and too much information for me.
 
Beyondbreakeventrading said:
With a holding time of only 5-10 days you wouldn't suffer too much time decay. You could buy ten put contracts and avoid the whole borrowing shares issue, however the spreads on these low priced options tend to be no smaller than with the higher priced stocks and can eat into your profits.
More...

Most of the stocks I trade don't have options at all or the spread will be too much. Even if they have options , I would be the first one to buy/sell them since all the strikes show a closing Price. Also, the commissions seems to better with stocks with the ability to scale in/out and with rebates.
 
cutetrader said:
Most of the stocks I trade don't have options at all or the spread will be too much. Even if they have options , I would be the first one to buy/sell them since all the strikes show a closing Price. Also, the commissions seems to better with stocks with the ability to scale in/out and with rebates.
More...

Sure, and you trade those stocks because they move. They move because they are relatively small and illiquid. Why not have your cake and eat it too? The leverage of options makes relatively placid stocks with great liquidity move sufficient to trade. This is the proper use of leverage, not to shatter your money management and get bigger, but to make viable trades out of smaller movements rather than sit there waiting for a setup. (no offense, I don't have an animus against stock traders)
 
You must log in or register to reply here.
Back
Top