Does any one know when I short stock, do I get interest? (Short stock rebate) Or the broker charges a fee for shorting the stock? And what is the interest I gain/lose from shorting?
(By the way I use TD Ameritrade).
Thank you.
Best Answer awarded for the most accurate information.
2006-06-15 18:13:04 · 5 answers · asked by K 2 in Business & Finance ➔ Investing
When you short a stock, you are borrowing shares from your brokerage company, who in turn usually borrows shares it is holding for customers. The shares are then sold. The brokerage firm gets the cash from the proceeds of the sale. Generally, the brokerage firm (not you, and not the clients from whom the shares were borrowed) invests these cash proceeds and keeps the interest on them. If you are a very big client (say a hedge fund) you might be able to cut a better deal.
What you pay is: (1) commissions on the sale (2) commissions on the purchase when you close the sale and (3) any dividends paid on the stock while you are short.
2006-06-15 18:25:43 · answer #1 · answered by NotEasilyFooled 5 · 1⤊ 0⤋
Important: even if you have plenty of money in your account and have one tiny "short" position, it is regarded as a MARGIN transaction.
You get no interest for shorting a stock. Since you have borrowed a stock from the broker to pay back later, interest is ACCRUING on you at the rate established on the account by the broker (it's in the short sale agreement).
If your account pays interest on inactive cash balances, you lose that as an opportunity cost of the short, of course.
2006-06-16 01:33:34 · answer #2 · answered by urbancoyote 7 · 0⤊ 0⤋
If you're using margin to cover the short..you will be charged interest as in borrowing costs. Shorting the stock means selling it when you dont have it so that you can buy it back when it goes down in price..your general sentiment is that the stock is going to depreciate in price. Transaction fees, yes.
Call your ameritrade customer service for details.
2006-06-16 01:18:40 · answer #3 · answered by Kriss71 1 · 0⤊ 0⤋
it basicall means u borrow stocks from your broker and sell it in the market without owning it in the hopes of buying them back at a cheaper rate in which the difference is your profit , or vice versa so you dont get interest but u owe stocks to ur broker which u have to buy the same day or it gets auctioned which can give you a collosal loss
2006-06-16 01:21:08 · answer #4 · answered by Anonymous · 0⤊ 0⤋
shorting a stock is a loan...so you don't earn interest, you pay it
2006-06-16 01:16:54 · answer #5 · answered by Black Fedora 6 · 0⤊ 0⤋