The link regarding Shorting US Treasuries is quite comprehensive: Interest Income: Customers earn Short Credit Interest on their short US Treasury positions based on IBKR’s standard tiered rates. Trading Policy: Minimum short position size is $10M face value per CUSIP due to limitations of the US Treasury borrow market. The thing is that just shorting UST and keeping the position to maturity, almost guaranties you a loss. You would need $100k margin for the minimum position. With 13 Week Treasury Bill at 0.4150% and IB paying a blended rate for USD of 0.589%, then you consider the cost to finance the margin, the bid / ask spread and commission, there is no money to be made keeping the balance. The only way to make money is to invest the proceeds of the short sale but the consensus on ET seems to be that it is not possible - IB: how to use proceeds of short sale .
There is a very interesting discussion on WSB on the same topic Box Spread Financing for extremely cheap 0.85% margin interest rates.
The boxes trade a nickle on either side of the mid. That means that everyone is basically on equal footing. I used them to lend at a slightly higher rate than treasuries, you could use them to borrow at a slightly higher rate than treasuries. This is in fact one of the very few places where a retail trader can get almost exactly the same deal as a pro with a seat on the exchange.
Sig, I always appreciate your expertise. From your own past, can you explain us how the loan can be used to get some return? I mean other than regular interest on idle balance. A lot of people here are saying that you cannot use the loan to open a new long position.
Interesting. Adderalin took the time to rxplain it step by step at least. But I am skeptical by all this. Execution is key here.
I may have inadvertently been confusing, sorry. If I have extra cash I could, in order of return, keep it at my broker in some kind of sweep account, buy a treasury, or buy a box. You can buy the box at a discount to it's guaranteed value at expiration, that difference is the interest just like buying a treasury at discount to face value. That's the buying a box to earn interest part. Alternately, you may want to borrow money using a box. In that case you sell the box, at which point you can use the proceeds to buy stock effectively getting the same 2X leverage as you would if you used your broker's margin. In this case you sell the box for less than you end up paying when it expires, that difference represents the interest you paid to borrow. It's crucial that you sell the box, then buy the securities you want to effectively margin, not the other way around as it won't work unless you have the cash from the box sale in your account first. Because you can generally trade just off the mid, the guy buying and the guy selling are getting/paying pretty close to the same effective interest rate. Unlike your broker, for example, where the spread on the interest you get from your idle cash and the interest you pay for a margin loan is generally substantially bigger. Why the example on IB didn't work I have no idea. I did once do this with IB when I had an account with them. I don't have an account with them any more because they're truly awful in a number of respects, not least among them their inability to correctly calculate the max possible loss in an option spread and their penchant for auto-liquidating based on that incorrect calculation, so I can neither defend their platform for this purpose nor recommend you use them for this (or anything else besides straight, unlevered stock trades for that matter). Hopefully that was a little clearer? Definitely worth running through the mechanics in a demo account a couple times to play with it.
I think that is the case everyone is interested in. What do you think about Robert Morse's postings in this thread? He strongly argue with higher belief-superiority that it is not possible.
First off if there's a question between something I claim about trading mechanics and @Robert Morse, I'm probably the one who is wrong. That said, I think selling a box is different then the specific question asked in that thread you referenced, so if you asked him specifically about selling a box he may very well provide a different answer. Not sure if he's on this thread, but would welcome his input if he is.
Sorry for coming back on this, but costs on the side, would shorting a box offer more borrowing that what IB offers? There margin requirement for illiquid securities are around 100%....