How to use Margin with Interactive Brokers
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- Опубликовано: 22 июл 2024
- Hi in this video we covered margin trading and things that you need to know if you have a margin account with Interactive Brokers. We went over the basics of margin accounts, common confusions that beginners have, as well as discussed some of the overall pros and cons to margin trading. One benefit of a margin account is the ability to hedge a portfolio using futures. These products offer higher leverage than stocks and they are a common choice for portfolio balancing. IB supports margin trading in retirement accounts however you should refer to their documentation for more details. Margin trading with IB has an account minimum of $2000 USD. If the account drops below that it loses it’s margin capabilities and becomes a cash account.
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Correction: ⚠️
The way we explained the first example about margin interest was partially incorrect. When entering a trade in a margin account, the entire value of the trade is still debited from your cash balance. So if the value of the trade is $16k and the initial margin is 6K and you have 10k in your account. Upon fully entering this trade you would now have a negative cash balance of -$6k. The interest paid for this example is on the negative cash balance that is held in the account. Margin interest can apply to other cases not shown in this video like overnight short positions or negative cash balances that resulted from a currency conversion.
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00:00:00 Intro / Margin trading basics
00:01:55 How to determine initial margin / yearly interest
00:04:23 Maintenance in a margin account
00:05:27 Pros of a margin account
00:07:09 Easier to diversify
00:08:33 Cons of a margin account
00:10:17 Final note
Be sure to view the 2024 updated version of this video here: ruclips.net/video/Y-MmaJKQHAk/видео.html
Probably the best IBKR tutorial videos out there. Keep them coming.
Thanks, will do!
Your videos are incredibly helpful. Thank you for taking the time to put these together.
Thank you for the kind words
@Verrillo, words cannot express what i am feeling after watching your videos. I thank you very much for your dedication of helping the community.
Thank you for the kind words! It's my pleasure to provide these videos.
It's the most clear video I've found on youtube so far, thanks, is there a posible you can make a video which may involve the "excess liq" and "SMA"?
Thank you for this video. I was waiting for it
Most welcome 😊
wow, you read my mind. I just needed the vid. Thanks man!
Awesome
Very good! Thank you for sharing your knowledge. If you could make a video about SIPC protection it would be very good specially for people outside USA
Great video and extremely helpful! Thanks a lot!
Awesome! 👊🤓
I am so grateful for this video. I had made a huge mistake and bought long-term ETFs (10 years) on a Margin Account. This helped me understand how a margin account works and I've changed to a cash account for the long term investments.
Glad it helped. Margin accounts are definitely more complicated but can also be beneficial for moving funds around with more flexibility.
Chirs well put together. Thanks bro.
No problem 👍
Very helpful! thanks!
Pleasure!
Dimebag would be so proud of you
thank you very much ..very very helpful !!!!!!!!!!
Glad it helps!! 🙂
Thanks a lot for this interesting video.
You are welcome!
Yes thx a lot. just what i needed of information
Glad you got value out of it!
Thanks for this short description. I would just like to mention that, if you are holding a cash account as a business, the two days settlement rule does not apply. At least here in the EU.
What is the UE? Just so people can be clear about that.
@@VerrilloTrading EU* my corrector is set in French (Union Européenne > UE) 😉. Thanks for pointing this out.
applies also to private cash accounts in EU - no settlement time
vERY HELPFUL THANKS
Thanks!
I understand now, thank you
Glad it helped!
Great video! I'd like to take this opportunity to ask how to configure it so that the position opened with margin is backed by the cash of the position and not by the cash in the account. In Binance, for example, you can trade in SPOT or CROSS mode. Spot backs the position with the cash taken from your account. If you leverage x10 and the amount to trade is 1000, the margin is backed by 100 USD. On the other hand, if you are in CROSS mode, it is backed by your entire account.
There is no way to change this with an ibkr margin account. Your positions are backed by all of the assets in your account combined.
ya i like low margins for stocks... at some point need to take advantage of that
Indeed boss
Great job here bro.
Cheers!
Great concise video bro.
Thank you I appreciate it
2:07 is that the only way to see what ticker you can get leverage on as it feels kind of "after the fact" (got to do order before you see) plus if speed important to you, you definitely don't want that window popping up, delaying your entry\exit.
You can disable that order confirmation, but it is important to understand exactly how an order impacts your account. If you are new to trading a specific product I would keep it on at first. Another way to see the leverage for a particular stock is by double clicking the symbol in a watchlist and it should bring up the complete details and margin requirements.
Great video
Thanks!
Hi thx for the Video. So if I wanna do leverage I just need to type in the amount of stocks I actually cannot buy?
Or is there any button to leverage. E.g. I wanna buy Stock x for 300,000€, but i have only 30K€ in my account. One stock is 300 Euros. I want to buy 1000 stocks. so i just type in amount of stocks 1000 and itll work?
margin is double edge sword if you dont know what you doing it can dig very big holes... some people will never climb out of...
Shoutouts on benefitting from a margin account without effective leverage:
- you can sell an asset today and use that cash immediately (cash account must wait for settlement, often 2nd business day) (good idea to check first that your broker won't charge interest)
- you can get access to products like futures, forex and options (which can be traded fully collateralized)
- you can short stocks (which could be covered with derivatives to cap losses)
Margin accounts are good for more than just paying the broker interest! ;-)
Confused on the negative cash balance portion. I transferred my portfolio from another broker, and purchased more shares from margin. Is this an issue?
Great video because i noticed that i have negative cash balance in usd on my margin account. Why is it so? Base currency is usd as well :S
Great video! Could you make a video about CFDs, and how to trade them on IB? Thank you!!
I will make a note of this, thanks.
Good job man 👍
Thanks! 👍
thank you!!
You're welcome!
Small question regarding the last part about interest on a negative cash. You say it's not a smart idea. However I do it. I live in Europe and have the cash in IBKR in euro. The cash in dollars sometimes goes negative when I am assigned on options or when I invest in a stock. I do not convert euros to dollars to avoid a potential depreciation of euro relative to dollar when converting back later in time. Isn't it a valid reason to pay interest as a protection against depreciation ?
Thanks for the video
oh nice
عمل رائع يارجل 👍
Thank you
Thanks for the great video my friend. Do you know what documents they specifically ask to be provided for withdrawals? I heard it easier to deposit money than withdraw
Thank you for the kind words. IB is a reputable name in the industry not some sketchy crypto or FX offshore broker. We never had an issue withdrawing funds.
Good explaination, could I ask how much interest would I be charged if I only maintain a negative balance for say 2 weeks, instead of a year? Is the interest pro-rated?
I believe IB calculates this on a per-day basis
Great video, thanks. I am from Germany. Just a simple question: can I borrow money on a margin account for other purposes and withdrawal that amount in my private account? Thanks for help.
No it is extra purchasing power, you can't withdraw it. They offer a debit card in which you can buy things with the funds in your IBKR account, it may not be available in all countries.
i appreciate verrilo trying in this video. but this information is incorrect. you only start borrowing funds after you have used up all of your own cash first.
You are correct.
It's what he says in the last part. "Never let the cash balance go negative". That's when you start using margin basically
Hi There! thank so much for the video. I just "upgraded" my account to margin. Will I be charged different fees when purchasing and short-selling stocks? All I wanted with the margin account is the short selling. Please let me know :) thank you so much.
Yes there are different fees for short selling stocks.
Great video , thank you! I would like to ask about an important part that is missing on the vid or maybe I miss it , how do you get rid of the loan ? For example let’s say I want to SELL PUT on Apple and I will get loan from IBKR of 5.000 USD , option expire worthless and I collect my premium, do I still owe money to IBKR ? When is the loan getting payed ? Thanks 🙏🏻
For long positions anytime you have a negative cash balance, you will be charged some interest on that negative balance. In this case that negative balance is the 'loan'. I am not sure if margin interest applies to options positions, you would want to read their documentation or call them. We will look into this at some point and create an updated video.
Awesome videos, super helpful to me because IB is pretty hard for new traders like me. Do you know how we can see/track the Premiums we get from operating Options?
Glad it helps. We do not understand what is meant by track premiums. There is an options chain to view stock options data.
Hi, thanks for this insightful video! I just recently switched from a Cash account to a margin account as it did not let me sell puts on the cash account. If I sell cash secured puts (all covered in cash), is there any interest charged?
Glad it helps. No, interest applies for negative cash balances and short stock trades.
I am so grateful for thise video.
How much margin can I get for trading futures in US index at Interactive Brokers?
If I have 100 dollars then how much buying margin will I get, how many dollars will I get for trading
With IBKR and most other brokers, Futures have fixed margin requirements depending on the contract. These margins originate from the exchange. So you need to view their web page to view what these margins are: www.interactivebrokers.com/en/trading/margin-futures-fops.php
Excellent explanation. So if I borrow that money to buy 1000 stocks of apple, but I sold them within 5 or 10 min after and close that position, the I interest % charged to me will be the same amount base in the annual calculation?
In this case you would pay no interest because margin interest only applies when you carry trades overnight.
@@VerrilloTrading thanks for the feedback
Hey, thanks for the video, but do we pay any margin interests even if we close a trade after few ours, i mean the trade doesn't go overnight to get the daily margin interest rate, Thanks
Glad it helps. The interest gets accrued when you hold overnight so no, in this case you shouldn't have any. Remember to review your monthly statements.
Good video thank you…
It’s not like tradezero right…
If I have 6 k I’m from canada will they give you 12-18 k in buying power?
Always wonder and confusing with IBK canada
Thank you sir
In a margin account they follow the reg T model for most stocks. Your estimate is in the correct range. You can also see the capital requirement for stocks by double clicking the symbol in a watchlist in TWS. For that to work you need to be logged in to a margin account.
Hi there and thank you for the great content;
if you don't use the leverage on your margin account, will you pay interest for not having to wait for cash settlement period ? in other word if I trade on margin account using only my own funds, what are the implications, do I have to pay interest for just having a margin account ?
Thanks for the question. You won't pay interest just for having a margin account. Interest gets applied when you carry negative cash balances overnight or open short positions. There may be other ways it gets applied but those are the main ones, refer to their knowledge base. www.interactivebrokers.com/en/trading/margin-rates.php
hi fatah, I also want to find the answer to this question, so were you able to figure it out?
basically I want to do short selling and for that we need a margin account, but I dont want to deal with interest due to religious reasons so I want to use 100% of my own funds, so would that be possible?
Yea, I have a moment of confusion in the video when he said you are paying interest on the difference between the margin and the total cost of the trade. I am pretty sure that you don't pay interest until your cash go negative (which still trying to figure out where do I look to see that) in TWS.
If you have been using a cash account to buy and sell stocks. But now signed up for a margin account. Does every buy and sell you do use up margin? Or will you have the option to use margin when you need better leverage?
With a margin account the margin capabilities get activated under certain circumstances. If you only go long shares and your cash balance is not negative, those shares are considered fully paid and therefore not using any borrowing power. If you decide to buy more shares and the cash balance goes negative, at that point you start using the extra buying power. An exception would be if you are short shares, your cash balance is positive since you sold the shares first. That trade requires margin right away, for long stock positions no borrowing is used until you carry a negative cash balance.
could u do a vid on margin required for naked short call? I can't calculate the margin required using the formula stated on ibkr. call price and underlying doesn't make sense
The strategy builder in IB's option chain should tell you what the capital requirement is for your trade.
@@VerrilloTrading ya I know, but I have a separate excel calculator that I use to decide position size. And if that naked call gets breached, then margin will increase. Anw thanks, I know u said u don't understand it either
Thanks for the video! I have a question. Would really appreciate if you could answer this. If I have 20k portfolio, no cash and all in stocks, can I just use margin to buy shares outright without having to deposit cash? Thanks.
If you have a margin account and you have 20k in cash that you have used to buy stocks. At this point you can buy more stocks but those stock purchases would be not fully paid shares anymore since you are letting the cash balance go into the negative. You are borrowing money to buy more shares at that point. If you do that just keep an eye on your maintenance because if you let that get too high (too many positions on) you will be at a high risk of the broker liquidating something.
@@VerrilloTrading Got it. Thank you so much for the reply!
I have another question: If I deposit money into my brokerage account, I am actually repaying the margin loan by reducing the negative cash balance right? That would reduce my risk significantly to be margin called? Thanks for the answer! That was very helpful!
@@DylanInvestingInLife Yes that is accurate. Since you will be increasing the balance of your account (net liquidity), your existing positions would have to decline further in order for your account to be below maintenance.
Will the 1.59% interest be factored in the realized P/L in TWS after taking profits?
The interest only applies to trades that are held overnight on margin.
What is the current margin maintenance requirement for QDTE on IBKR? On Robinhood it is 25%, but I am curious what it is on IBKR.
Can you be specific, what type of strategy? Selling naked calls or spreads? I can check tomorrow for you.
Could you explain please when IB starts to lend money? For example I have 100k of cash on my account and I buy 10k of stock. Does it mean that broker lends me like 6.66k for that position even if I have enough of my cash not to use margin? Or does IB starts lending only when I used all my cash and want to open more positions?
I do not want to use margin account at all, but IB does not allow to sell puts on cash account...
This is explained clearly in the description and in other comments on the video.
is there a way to trade WITHOUT a leverage when trading under a Margin account? I mean I haveb 100k and only want to but 100k worth, but they are forcing the 70% margin... I want the margin only when selling to be able to trade again before the T+2
did you find the answer?
hello mate
great lesson , what if i day trade? in a margin account and just hold the stock for the day or couple of minutes do i still get charged 1.59 ? if i use leverage or what if i use just my funds do i still get charged ?
thank you again
No the interest only applies to any negative cash balance or short stock position you hold overnight.
Do you ever need to pay money on your winnings from a trade when using margin? So if i have 5000, leverage to 15000, then that stock ends up going to 30000. Would i need to pay a portion of my winnings on top of the loan rate?
No, you assume all of the risk and all of the profit.
I appreciate your IBKR content. Trying out quoteboard next week. Looking forward to watching your tradingview content as well. Question: How does the margin rate work on short duration options? Random example: Say I sell a 3dte contract. The margin is 10k. I realize a 20%+ profit and am out of the trade within 4 hours of entry. Is IBKR is charging me a fractional margin fee based on my trade? Also, are marginal interest loans deducted immediately upon sale of the position, or are they charged lump sum? (monthly, quarterly, annually). Thanks. Keep up the good work.
There normally won’t be any interest charged if you close the trade in the same session it was opened. Shorting stocks is different those have fees.
It is not deducted immediately it gets pro rated based on the interest rate and charged to your account monthly. If the interest rate is 2% and you held a trade overnight for 1 day you will pay (2%/365) * 1. There should not be interest on short option positions because you are collecting a credit. Normally if it’s an option on a harder to borrow stock that interest is already being priced into the option itself. Margin interest is charged when your cash balance is negative overnight.
@@VerrilloTrading Thank you!
i have question and i would really appreciate if anyone cane answer it. so the question is that if i took a long position and closed that position on same day on my margin account, will i still have to pay the interest on that margin amount?
The answer is no you will not.
Hi Chris I am new to trading and just set up my margin account in IBKR. My question is how much funds do I need in my account to short lets say 500 shares of NVDIA at current price (~430.00). To go long I would need a buying power of at least 215K. Long and shorts works the same?
Hello, no in fact going long and going short often have different margin requirements depending on how the brokers system is calculating the risk for that stock. You should be able to see the margin impact when you submit the order. It is displayed in the order confirmation window but if you right click on the order, there should be a menu that is able to show the margin impact of that order.
Can you elaborate on the negative cash statement please? If I borrow money for an investment I will have a negative cash balance. How can I avoid that while using borrowed money on stock investments? Do you mean we should not hold the negative balance for more than one day? Because I used the loan for 40% of the shares I bought and I intend to keep the shares for longer(a month or two). Is it not how the margin account supposed to be used?
Hello, it is not necessarily a bad or a good thing to have a negative cash balance. It just means you are borrowing money to hold positions in the account, the investor might want this. In order to achieve greater leverage with trading stocks, it is necessary to use margin therefore use more cash than you have in the account. Let me know if that cleared it up a bit.
So if I have one trade with IBKR and I cross the maintenance threshold, will they liquidate the whole account (trade) or just a portion of the trade
That is up to them to decide but normally they will liquidate the trade that is the most risky and causing you problems. Just don’t get into that situation and keep them on speed dial if you ever do.
Hi. I didn't get what you meant about a negative cash balance...! Does your cash balance not become negative when you start to use margin?
You are right, margin is only being used for long positions when your cash balance is negative.
I guess you mean...cash balance means your very own money.
how about the wash sale rule? does the margin account bypass that as well? because you will be doing day-trading so selling and buying in gain or loss many times per day
I do not know how they treat that in a margin account. This is a good question to ask IBKR support. I also think it's different in each country.
@@VerrilloTrading how about USA? does the IB margin account bypass the wash-sale rule in the USA? please let us know, thank you
Can we keep both account ?cash account for long term stock investment and margin account for options trading.
Yes. You will need to open them one at a time though.
So with a margin account, the broker is always lending money even you have the funds to cover the transaction.? For example, a 100k margin account. I buy 100 AAPL shares at 100. Total funds needed for the purchase 10k. As I have a 100k account, they will require me only 3k (in case to be 30% with this ticker) and borrow me the other 7K or that is something you can avoid or configure in your account? In case of not, if they borrow that 7K for this trade and you open and close that position at the same day, they will charge this loan interest for that day or as you have closed it, no loan interest charge is involved? Thanks a lot for your videos and the info you provide, mate.
Hello, this is not actually how it works. Please read the additional comment in the video description for further clarification. Also read other comments on this video that clear up your exact question as it has been answered already. Cheers.
Thanks for the tutorial, very helpful!
However I got some questions if you may. At the end you say you should never ever let the cash balance dip into the negative cuz I'd be charged an interest. But this whole video is about margins, so what if I just bought another portion of stocks, got my balance below 0, but that is fine, bcz I just bought smth with a margin loan, right? Especially if I only buy the same stock, right?
Also, what I am still missing to understand is how do I cancel/repay a margin loan. E.g. imagine a scenario, when you open a position using margin loan/leverage, then I become a bit less risk tolerant and would like to use my cash instead of margin loan. In such a case, do I need to close the margin position and open a new one with cash? If so, it has tax implications, right? E.g. in my country, if I don't hold ETF for at least 1 year, I get taxed from any gains.
Then there is another scenario, when I have 0 cash balance, but positive buy power and I just buy some stocks. That will automatically use margin loan. What happens if I add more cash to my IB account? Will it cancel/repay the margin loan?
I am a noob... but thanks for any effort to help ;D
Aand yet another thing I am missing is where do I see which of my positions are using margin money, how much etc. Maybe it's in the app you're using, I am only using IBKR mobile app, so that could be the reason I can't find it.
You do not need a margin account with IB to trade futures? I trade futures on my
Roth and regular IRA with them.
You are right I forgot about these! Some brokers support futures trading in retirement accounts, it can vary depending on broker. I will make sure to update the video description. Thank you!
So the interest isn’t on the idle cash sitting in your account. It’s only on the open margin trades that your holding for one year ? So the interest doesn’t apply to day trades ?
There is interest paid on idle cash in a trading account but that is not the same rate as when you use margin for trading. "So the interest doesn’t apply to day trades ?" Right, if you open and close a margin trade within the same day, you won't incur any overnight interest.
@@VerrilloTrading thank you very much I understand now.
Hi, quick question... let's say I use margin to sell a put on Tesla, I get a loan of $40.000 from my broker in collateral, when is my loan payed? When I have more than 40k in cash balance on my account? When the option expires? A year from the day I loaned it ? That part is a bit confusing to me, thank you
I have the same question about how IBKR calculate the risk of a exercise position at expiration and how it deals with all of it
Hello, I was wondering if I can use Margin and just take out money from Interactive Brokers to my bank account. The same way Robinhood allows you to do it?
I'm not sure if they let you withdraw cash if you have a negative balance. They do have some credit card services that might allow you to do it, depending on your country.
Hi i just setup hotkeys tansmitted an order for call option. Tried to cancel it it doesn’t cancel orange color doesn’t let me even edit it if you can help thanks
If you’re submitting orders on the weekend you’ll run into issues like you described.
@@VerrilloTrading it could be canceled on Monday right due to market closed its having this issue i guess ?
@@VerrilloTrading thanks you are the bedt for ibkr
Appreciate your vidéo, I have a little question about margin account. To trade energy futures (EU and US) do we have to make at least a usd 200k deposit? Or there is no minimum
The amount required to trade energy futures will depend on the margin requirement for the specific contracts you want to trade. In order to trade futures you need a minimum of $2000 USD which is needed in order for your account to have margin capabilities. You can view the margins for futures here on their official page: www.interactivebrokers.com/en/trading/margin-futures-fops.php. For example if we look at micro WTI Crude oil, the margin they list currently is USD $2700 / contract, and there is no difference between intra day and overnight margins. Note that this margin is actually higher than what the exchange requires in some cases, I do not know why they do this. I think they have their own risk models in place for setting their margins.
@@VerrilloTrading clear, thank you very much @VerrilloTrading , I hope that I'll be able to get access to these US energy futures throught IBKR with my french citizenship... as we usually hear about EU regulations being quite severe with individuals like me, willing to own leveraged financial products.. with the goal of protecting our capital which is of course a good thing, especially for futures markets novices
stupid question coming up. if I put $5000 cash into a margin account and I blow that account. would I ever be liable for more than that $5 000? thanks for your help.
It is possible however very unlikely because IBKR has pretty strict requirements. They will liquidate a trade long before it gets that bad. There is always a possibility of some black swan event, like when Crude went to -$40.
Hey, a couple of questions:
If I have a negative cash balance (let's say -10 000 USD), then this is the amount of cash that I borrowed from IB, right? And if I deposit 10000, then margin is paid off?
Is it possible to buy stocks/ETF's on margin when you have a negative cash balance?
And thanks for a great video, I really enjoyed the presentation
Yes if you deposit the 10k assuming all of those positions were long stock positions and not short positions or leveraged FX positions then yes that is correct. You can initiate more positions with a negative cash balance but keep an eye on your maintenance margin. That will also depend upon the margin that the broker offers for a specific product in your account and that is also subject to change. Think of the margin power as an extra cushion or privilege, it is not something to be abused. The higher the leverage, the higher the odds that your account equity will not meet the maintenance in the case a position moves against you. Pay attention to the order preview window, it shows how much that specific trade will impact the maintenance in your account. You may reconsider the position size depending upon the risk you are willing to accept.
@@VerrilloTrading Thank you for the detailed answer, I appreciate it
Can I trade with a Margin Account, using 100% of my own money, NOT borrowing any money with the objective of day trading, primarily to avoid waiting for +2 settlement and to allow me to make more day trades within a trading day/week?
Yes you can do this. However it does slightly defeat the purpose of the margin account. With the margin account you can get past the T+2 settlement and turn around day trades without an issue. The PDT rule is something else which you may have been referring to in the last sentence.
lets say ur account is above 25k and its margin account .. can you do a round trip trades in one day ? and the settlement will be the same day ? for example u bought shares worth 10k the same day 6 times and sold them back same day .. tomorrow you u can use those 10k funds ?
Yes this is correct, the settlement is immediate.
Is there a way to know how much % paid for margin use during the year or each trade?
This should be on your brokerage statements.
what if I buy and sell the stock on the same day using margin, do I still need to pay interest? Thanks!
Margin interest does not apply in this case.
Does ibkr charge interest on money borrowed to trade forex ?
Logically I would think yes but you should read their documentation on leveraged forex trading.
I have a really important question
If I have $10k cash in my portfolio and want to buy a $2000 worth of stocks but I want to have $500 of it from margin can I do it??!
The answer is complicated. This would be best directed at the broker to receive an accurate response.
Hey - And what happens if I have a margin account but I don´t want to use margin just yet but in specific moments? Is it possible or every single buy will be executed with margin?
In that case just make sure you have the cash in your account to cover the entire purchase price if it's a long trade. Certain types of trades require a margin account for example you can not go short on a stock without using margin because short selling requires the borrowing of shares. If you did not read the technical correction in the description, please read it.
Ok, what if I don't have any money? All future stock purchases will be based on margin?
Great video bro.
If I buy some stock and Sell it after 3 days, they will still charge 1.59% ?
Or just 1.59×3/365 ?
Yes the interest rate is annual and it gets pro rated for each day you hold and charged at the end of the month.
Do you pay interest on margin if you buy and hold for less than a year?
Yes, for every day you hold a debit cash balance or short position overnight.
Is IBKR the only broker which requires the use of margin in a margin account? Also, I've checked my monthly IBKR reports and I can't find any margin fees. What are they labelled as? Do you know? Thanks.
That's how margin accounts work, the broker gives you more buying power. The interest applies if you hold a trade on margin overnight. It should appear on your monthly statement.
@@VerrilloTrading a) I contacted IBKR customer support and asked why I have never been charged margin interest. They said I have never been charged because I have always had enough cash in my account to cover the cost of the trades I've made. So IBKR doesn't force you to buy on margin in a margin account. b) IBKR customer support also told me that in a margin account, stock trades are settled T+2 just like in a cash account (not T+1 as you say). However, in a margin account, you can trade with unsettled cash.
@@ranjanagupta6877 Have you held trades overnight on margin? Are you sure the stocks you are holding are on margin? They don't give margin on all stocks.
@@VerrilloTrading Yes, I've held trades overnight. I've always checked the "Margin Impact" section of my trade confirmations and yes all of the stocks I've purchased have margin requirements.
the same situation here. Have margin accaunt this year made already 50-70 trades which holding from one month till half year. If i Log in in Trader workstation have everything the same like Verillotrading showing us margin requirements ant etc looks like I need to pay some interest and buying every time in margin. Even In the right corner up written margin maintenance some amount of money. But when I go to statement reports and in Aggregated Costs and charges statement I can see interest paid box start from this year till now I see 0. I check in right place or I dont understand something till the end? p.s trading every time only the amount of the money how much have in balance never was going more when balance cash.
Great video!
You said that you should never have negative cash balance with margin, if i have 1000 in cash and want to by 2000 worth of a stock wouldn't that mean i will have a negative of 1000 dollars in my account after the buying of the stock?
btw I tried to buy a stock in margin in the demo and even though it is listed that the requirements for margin are 30% it seems that in practice all the available money was used and not just the initial margin, does that mean that the interest on the transaction should actually be calculated differently? for example i should have been in -86,594$ but instead i was at -9000$ (all of the cash was utilized for buying the stock,not just the 30% initial margin)
Excellent question! I experimented on a demo account with $10,000. To avoid a negative balance on the account, it must be traded for exactly $10,000. The moment this amount is touched, the cash becomes negative. And this makes margin trading completely pointless. There is no point in switching to a margin account if you buy only $10,000 worth of stocks that you own in your account. The negative cash balance, in my opinion, is the amount that accumulates whit margin trading, and this is actually the amount that the IB interest is charged on. But I'm still not entirely sure if that's the case, that's what I found out from the demo account experiments.
If the account balance falls below $100K then i guess IBKR will no more consider it as portfolio margin account. Am I right?
If that rule is stated on their web site then yes that is what it is.
IB charges 1.59% if you hold for 1 year. But if you buy and sell the same day? How much is the margin cost?
Nothing I imagine, margin interest is only applied when the position is held overnight. You can do some reading on this for sure.
In 3:26 and following you are doing a little mistake (due to mixing up with two currencies) if I see it correctly:
Initial Margin is in CAD, while the 100 Apple stocks are measured in USD. IBKR borrowes 70% of 14568 USD = 10197.6USD.
:-)
Thank you
Thank you for that as well!
thank you for the video, one question...
if I have 5k in total and I'm playing forex,margin requirement is 3%...can I borrow 50k?
Yes most probably you can. I had around 12k USD balance and was able to put in a leveraged fx order of more than 200k USD. You can test this with the demo account too.
Forex has lower margin requirement than stocks on IBKR.
can I buy stocks without using margin loan while using a margin account in IB? (e.g. if I have enough cash deposited) Or will IB consider every trade as being on margin and co-finance it?
If the broker is allowing margin for the stock then yes by default they will be loaning you buying power.
@@VerrilloTrading Actually i got different answer from IB, i will paste in the next comment
share your answer from IB.
@@RamRam-cg3rq I also want to know this. Where did you paste the answer?
@@VerrilloTrading apparently my paste reply wasn't published for whatever reason. I can't get it again as it was live chat with IB. The answer was they use the margin once your cash isn't enough to cover your orders/equity
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Thank you for the good info. I have a margin Interactive Brokers account and I'm a long term investor. I have deposited 150k in my account and I purchased 149k worth of stock.
If I go into my account details, it shows current initial margin 46k and current maintenance margin 37k.
I am a bit confused, I would appreciate your help:
1. So as long as my cash balance is not negative, I do not borrow money, thus don't pay any interest and there's no margin calls is this correct ?
2. Can you select the % of margin you borrow for each trade ? So for example instead of 50% own cash - 50% borrowed, can I choose 80%-20% ?
3. When margin calls, is this calculated based on the whole portfolio or based on each individual trade ?
Thanks in advance!
1. Not exactly. In a margin account even if you fully pay the shares you'll notice the maintenance margin is never at 0. The broker will warn you about liquidation when the Net liquidation Value of your account is getting too close to that maintenance threshold. In the case that you fully pay the shares, your account value may have to drop by (estimated) 95% or more in order to get close to that threshold. Do a test by bringing up a new order preview and see how much it impacts your maintenance margin depending on the order size you choose. If you can only afford 3k worth of shares, the broker will let you trade around 10k worth but if you use all that buying power in one trade, the maintenance margin will be very close to where your account value is. Avoid doing this since it is a high risk of forced liquidation, it should be reserved for special use cases only.
2. In a margin account If you have 3k cash and you buy 4k worth of shares then theoretically you are borrowing 1k or 25% of the trade value. If you buy 6k worth of shares with 3k cash, your borrowing 50% of the trade value. Remember that different stocks or markets have different maintenance margins so make sure to check exactly how much it is impacting you. What we wrote here is only theoretically correct but the broker determines margins based on their own models for each stock individually.
3. Whole portfolio normally but they will close the trades that are going against you the most. In the case where everything is going against you, they might just trim every position, not sure there.
Hey can u show me how to downgrade to cash account plzz
This is possible in the IBKR Client Portal when you go to Account Settings and you should see your account type. If you select this it should be possible to downgrade to a cash account. Another options would be to open a support ticket and request this.
i am confused, if for past 1 year, i invest in margin account, does it means all my stocks i brought was on margin? how to check whether i am on margin and how to check any of my stocks I hold is on margin??
If your cash balance is positive you are not using margin unless that cash comes from an open short position.
@@VerrilloTrading thank you so much for reply.. if 1 of the currency is negative but the total cash in USD is positive, I am not on margin right?
@@raymondwood5496 There might be exceptions but generally if there is a negative balance in any currency you are most likely paying interest there.
@@VerrilloTrading thank you so much...
How I get less margin like 10% with IBKR?
They set it on a symbol to symbol basis. I don’t think they offer capital requirement this low for stocks.
crazy to see that margin fees have more than doubled on ibkr. Once you loan is the interest fixed or variable?
They need to adjust if the fed keeps raising rates, it will effect everyone eventually.
@@VerrilloTrading so your interest rate gets adjusted every month or is it paid by day?
Is margin account compulsory for trading leveraged forex ?
I think that it is compulsory but I have not tried it sorry.
@@VerrilloTrading thanks
How much income do you need to receive margin?
Minimum account equity USD $2000 to have margin capability.