Hi, I have an Interactive-Brokers Account which I use for trading. In times that I have less than 10k USD in cash on my account IB doesn't pay interest. In our economy lessons at university we learned that one can buy certain baskets that represent exactly the current interest rate. On could buy such a basket and would get the interest. Of cause commissions accrue. What do you do to get interest if your broker doesn't pay it by default? Regards, K.B.
Lets see, that is $1.39/day that you are missing out on. Buy a High Dividend Yielding Utility Stock and sell covered calls against the position as insurance.
I see. But this works only if I hold the stocks and options for at least that time that is necessary to get the dividends. How long does one have to hold stocks to get the dividends? I mean when do I have to buy stocks the latest and when can I sell the stocks the earliest? I just did some calculations and I figured out that the time value of the options alone doesn't produce profits once commissions are included to the calculations. So profit is produces by dividends. I guess this is what you meant by >Buy a High Dividend Yielding Utility Stock and sell covered calls against the position as insurance.
Buy T Bills or some kind of bond ETF. You'll get the current yield minus commissions. Of course, this will affect your buying power for trading if your balance isn't in cash.
Is it strictly true that you have to collect the dividend? I don't think so. The price of the stock creeps up to include the dividend, then drops the amount of the div on ex day.
For better calculations one would need historical stocks and options prices. Does anyone of you know a source where one can get historical options prices? Regards, K.B
It's not direct answer to your question. I'm not sure whether you understand all the implications of interest rates and calculation. If not, see: http://en.wikipedia.org/wiki/Interactive_Brokers#Interest_rates See also: IB accrued interest In short, you never get interest for the first $10,000, no matter how big your account is (that is you still lose interest even if your account balance is over $10,000). Beware that you may lose even more interest since the calculation is based on sub-balance (per currency and/or per security/commodity account), not toal balance. For each sub-balance, you lose additional $10,000. In order to avoid losing interest, you have to empty your account.
Wow - I did not realize that everyone looses the interest rates for the first 10.000 USD!!! This is makes my thoughts concerning 'getting interest rates by being invested' even more important. Thanks a lot for your comment. Regards, M.B.
There is a lack of transparency by all US brokers on this issue. As for IB its so hidden away on its site most would never be able to find it. Search "interest" and all you find is the interest you pay them. Sad thing is, IB actually pays well on larger accounts and even has stunning deals on the more accredited investor sized accts. Another good payer is Fidelity but I don't know what the brackets are there. The real disaster for many Americans is not getting paid on multiple IRAs and Roths scattered about at brokers. For years it didn't matter. Now it does - and the industry is avoiding it like plague. TD Ameritrade comes to mind for me. I can't even tell from accts. I've had since the 90s whether this cockroach bank even pays at all.