i believe it means that your broker will be charging you an annualized interest rate of 119% for that day on accounts that are short GM. That interest rate can change each day.
SSF .. why the free money?
- Thread starter empee
- Start date
i believe it means that your broker will be charging you an annualized interest rate of 119% for that day on accounts that are short GM. That interest rate can change each day.
Yes BUT if your buying shares on margin don't forget to take that expense into account
As others have pointed out there is no free money when you consider all the costs.
IMO probably the way to approach it would be to only buys shares NOT using margin to avoid paying interest. And only take trades - IF - you can get a better than average entry on the SSF leg.
I believe the EFP thing was not intended as a "free" arb for us poor retail guys anyway. But rather for traders ALREADY in a long or short stock position to exchange their stock position for a SSF with a favorable premium or discount to the stock price.
As an example I own 100s IBM and I'm paying margin interest. Lets say IBM is on the IB EFP interest page and for whatever reason the SSF is currently offered at a substantial discount to the underlying stock price. I sell my IBM shares and buy a SSF contract instead.
Now I'm not paying interest, I've got long exposer to IBM and I'm tying up less capital to hold the SSF than I was with holding the stock.
Used in that fashion it's probably worth looking into.
bump. i've been sitting on this short 1.65 long 1.22 trade for a month now. Not bad if GM goes to zero soon.