How much can I borrow and how are the interest rate charged? It say's 4.75% U.S per annum basis. I am not sure what that means. If I bought a stock and sold it at the same day will I'll still be charged 4.75%? How do daytraders even make money trading with margin if it was 4.75%?
I can only express what is typical, not what your broker will do. Eg Margin account with $100,000 You buy $150,000 worth of SPY You are borrowing $50,000 from your broker to buy the SPY. (50K*4.75%=$2375 yearly) From settlement date of the purchase to settlement date of the sale, they will charge you your rate on the $50,000 ($2375). They will take your rate and internally get a daily borrow rate. They will then bill your account monthly for that borrow. (Around $6.51/day). Day trader do not borrow any funds. In the example above, if you sell out at EOD, you have no securities. At settlement date you have no borrowed cash balance. In a Reg-T account you can trade up to $400,000 in securities long or short, but must drop down to less than $200,000 overnight. If you end up with a $0.00 balance, you get charged $0.00. Bob
So if I sell the stock before the settlement date that means I am not gonna be charged interest? Or if that's not correct then what is the day they'll start charging the interest cuz sometimes I hold my stocks overnight.
Incorrect. If I buy the stock and borrow on Day 1 and sell it on day 2, I will get charged for one day of borrow. I was just pointing out that they internally they calculate this based on settlement date vs trade date. That might have been too much information.
An easy way to think about it: You are being charged *per night* that you hold the stock. Don't hold anything overnight, and you won't be charged. For more specific details and timing, you should consult with the broker (they may charge after market close, or after after-hours close, or just before market close, etc.)
Weird I tried to short a number of stocks & all of them got rejected. Also, I had $400 in my account and it allowed me to make one trade of $1000. After that, my balance became $350 and it won't allow me to borrow anymore no matter what the amount. Not even $50. Don't understand how that works but I am switching back to my cash account where I can borrow 2x my balance with no delays unlimited times.
2-1 OVERNIGHT 4-1 INTRADAY think in terms of a balance sheet .different securities take different times to clear. ie settled/unsettled . when everything is settled you will have the full margin/ buying power back. Keep your margin account dont switch to cash
I don't see how it's better. With cash I can trade without waiting for it to be settled. With margin it takes several hours. The only difference is shorting and since this particular broker has no stocks to short anyways I ain't losing out on anything.
Cash account-You get your buying power back in 3 days. You MUST wait for it to settle. Margin account-You get your buying power back after you close a position, at that moment.
I think from a previous post that he is Canadian like myself. Depending on your broker, they'll accept the funds from a trade waiting to settle to purchase new funds. With TD direct investing I know that with a registered account( cash only available) that they will allow t+3 from a sell transaction cover the buy of a new transaction with t+3. You cannot withdraw funds that aren't settled but the funds from a sell transaction are immediately available for another buy. I do know that interactive brokers Canada does not allow this. In the states I think this is called free riding and is illegal. I've never heard of buying 2x your account anywhere here with a cash account.