I am trying to say i cant find zero dividend EFP that pays more than 5% ( i use the contiunously compounded annualized rate) this week except ISRG. But i dont want ISRG because the size is too big and they are almost limit up everyday which means you will be suffering mark to market losses. On the other hand, there are some 5.2% if you can invest in dividend EFP.
Well, my experience is different. I just today, for example, sold GILD for Nov and got 5.075%, on a zero-dividend EFP stock. I've been selling zero-dividend EFPs for months, and I never once got below 5% on any of them.
5.75%. Where????? Did you calculated yourself or use IB's rate. If you use IB's rate, which one? Annualized or contious compound? If you really see that rate on IB, can you do a manually calculation to see if it is consistent. I see the opposite. Nothing over 5% except ISRG this month.
Hey Jim, Do u know what the delivery process is like? Do the OCT expired right at 1600 and i dont have to responsible for overnight margin? I have all cash right now (say 10K) and 10K worth of EFP expiring today.I sold like 8K EFP today and I am relectant to sell 10K worth of EFP today because i am afraid that i wont have enough overnight margin to go through the weekend. And also, do you have to pay for the 8K interest over the weekend (because of the T+3 settlement) or do i get back the 10K right at 1600 today?
Sell the full $10K of EFPs today, because today is expiration day. The trades establishing the new positions won't settle until T+3, the same day on which the expiration trade closing your previous position will settle. So you will have the margin when you will need it, and you won't incur margin interest rate charges paid to the broker. I have no idea what you are talking about with the number 1600.
The mark to market risk, even in a worst-case scenario, involves only a very small amount of money, relative to the total account equity; and these small worst-case losses disappear if you just hold the EFP to expiration day.
I previously answered this question in detail in this thread, but I forgot to mention the terminology, that EFP stands for "Exchange for Physical", meaning that a futures position is held against an opposite hedging position in the underlying asset, until expiration, at which time delivery of the underlying eliminates both the futures contract and the opposite position in the underlying asset.