I am a bit confused about IB's fees (http://www.interactivebrokers.com/en/accounts/fees/interest.php), can someone please shortly describe the fees I pay (or the interest I receive?) on the following scenarios. Let's assume a 1000k (1 million) US Dollar account for each: 1. 1000k cash. I assume IB pays USD Benchmark 5.095% - 0.5%, because the balance is over 10k. So far so good. Now what about these cases? 2. 500k long stocks, 500k short stocks. Does this incur any fees? In particular what is "Short Stock Interest Earned"? You earn interest for shorting stocks? 3. 1500k long (500k borrowed from IB). Does this incur any extra costs because I go into margin? Thanks in advance for any input. Really confused
yes, u get paid on your balance if above 10k at benchmark interests rate. if u borrow on margins to buy stocks u are debited the same amount yearly [maybe more, i am not zure]; if u short on margins u get credited but not the whole rate; every stock earns u a different rate and part of it is deducted, so u may end up with 1-2% max credit.
balances over 100K actually earn LIBOR (the BM) - 0.25% (better than the rate posted above). Interest is also paid on short stock over 100K. if you take a look at the table, the rate is higher the greater the short balance. for the margin side, you'll pay margin on the 500K margin balance. Those rates also depend on the amount on margin (see the table in your link).
No, the calculation is a bit complicated because the interest is calculated at pro-rate (which is very different from other brokers and banks). For the first $10,000, you get no interest. For the next $90,000 (100k-10k), you get benchmark interest rate - 0.5%. for the rest, it's benchmark interest rate - 0.25% Although the interest rate seems good, no interest for the first $10,000 really hurts its attractiveness. This calculation method applies to other fees and commissions.