That was very helpful - now I'm not a finance genius, so I'll add one more question. If the EFP does have a dividend, then I assume it is added to the spread? So, if the 6 EFPs were sold for 15.30, I would add the dividend to that?
i think the transaction costs are .05 per share, or .50 per contract. on non-dividend stocks , is there any reason for the variation on interest rates? (i'm using the example of non-dividend payers in order to take the dividend question out) also what is the margin requirement for EFP's?
DAV, in your example, is any part of those funds used to put on the EFP , available for trading after the 20% margin. As an example. If there is50k of cash in an account, and all 50k was used to buy an EFP, then that account would be earning x% interest on those funds. Since the margin is only 20%, is the remainder available for daytrading, without incurring a margin loan ?
on IB's margin listing, it lists margin for a "protective or covered SSF" as: Initial: Short or long stock margin requirement Maintenance: 5% of Stock Value I did notice though that it lists 5% margin for SSF futures spreads. I'm leaning towards this 5% number for the EFP
Have we given up an clarifying this thing? Can you avoid the 10k no interest 'penalty' ( a kind word) or not?
does anybody know how this is treated with regards to taxes? is it short term capital gains or interest income?
since i don't think there's ant SSF's farther than a year out, it would be short term capital gains. if it's capital gains than you'd be able to use it to affset any capital gains losses. if it's interest income you wouldn't be able to do that. also any dividends you receive from an EFP are NOT QUALIFIED since the position is hedged. You'd have to pay at the regular income tax rate instead of the 15% qualified dividend rate.