Do I Need to Pay Margin Interests If I Offset the Excess Longs with Shorts?

Discussion in 'Trading' started by Cyrix, Mar 5, 2018.

  1. Cyrix


    Say my account size is $100k on Interactive Brokers.
    I have purchased $200k of IBM, and shorted $100k of SPY.
    Do I need to pay margin interests on the $100k borrowed for IBM?

    What if I short $100k of SPX futures instead of SPY. In this case, do I need to pay the interests on IBM's margin?

  2. Robert Morse

    Robert Morse Sponsor

    This is the way it works.

    Type 1 account- CASH (For Cash account)
    Type 2 account-Margin (For long stock, long and short options)
    Type 3 account-Short stock

    Type 2 and type 3 do not offset. You will be borrowing $100,000 from your broker. You can offset short options with your long stock and long options.

    Futures, no. ES options would not work, as they are in a futures account not you margin account. You could sell to open SPX/SPY options and offset the long stock for the purpose of your debit balance in your type 2 margin account.

    raf_bcn and MoreLeverage like this.
  3. In principle, you would also earn some interest on the credit balance in Type 3 from the short proceeds. In practice, with low interest rates and after deducting what costs might be involved to borrow the short shares, there's usually not a credit amount on the short side.
  4. Cyrix


    Thanks guys.
  5. Roderick


    Also for the margins position, you need to have a balance before you could trade. If you have bought $200 K of IBM and already in a negative balance, I don’t think they would even allow you to open any further position