Can anyone elaborate how interest charge will be calculated in the following situation: Option calendar spread: long '19 option and short '18 option with large size. Net price is $5 ($15-$10) per contract. Let's say size is 1k contract. So in this situation how interest charge will be calculated (if r=2% for negative and r=0% for positive cash balance)? 1. $5*100 000 * 2%= $500 000 * 2% or 2. $15* 100 000 * 2% - $10 * 100 000*0% Thank you.
I am not familiar with trading calendars, but assuming you're trading US equities, the SEC regs require margin coverage by expiry -- that would leave your shorts (the $15s??) as uncovered -- that will be the margin to be hit. So, if we're voting, I'd go with 2. $15*100,000*2% against the - $10*100,000*2% received. (Also, and this may be both old *and* wrong-headed, but with deposits, IB has an interminably-long hold period (to hinder money-laundering as I recall?).... is there any such "hold" or "non-interest-earning period" for *trading* revenues? Eeeesh.) I will watch this space and see what I can learn. Calendars seem so easy in equities (Long ago, I found it assuredly boring!), but I've had issues in trusting it to be a money-making operation in indexes. Would be nice, in times of persistent low vol, to go calendar or diagonal. Sheeesh.) (Oh, and lastly........Ye ol' Associative Law and The Grand Commutative Law that we learned in grade school?? sez that Option 1 == the same $10,000 that == Option 2. Jus' sayin.....)
I believe that you may find the answer on this IB page: https://www.interactivebrokers.com/en/index.php?f=interest&p=calculations Your option positions are all part of your securities account segment. At the end of each day will IB calculate the so-called EndingSettledCash_Securities and use this parameter, in combination with some others, to determine what the cash position of your account is. In this calculation is each position counted separately, so your long and short position are counted separately. Interest calculation is based on this cash position. The story gets more complicated if you are trading in multiple currencies, as each currency is evaluated separately by IB.