I have recently noticed that on some pump and dumps Interactive Brokers’ short stock borrow costs have gotten rather high. On ECAU, SWVI, and GNIN the borrow costs have been at times about 50% APR. Even worse, Interactive Brokers does not charge based on the total value of the position, but based on the value of the position after rounding up the share price to the nearest dollar, so a 20,000 share short of a stock at $0.20 will incur borrow fees not based on the $4,000 position size but based on the amount of $20,000 (20,000 x $1). Likewise, for a stock priced at $1.06, the price would be rounded up to $2.00 for calculating position size for the purpose of interest. So to calculate your borrow cost, you need to take the APR, multiply by the number of shares and the stock price rounded up to the next dollar. That is the annual borrow cost; divide by 360 to get the daily borrow cost (which is also charged on weekends).

So for a 10,000 share short position in SWVI, with a 50% APR, the daily borrow cost is 10,000 x 0.50 x $1.00 / 360 = $13.89. For a position with a value of about $2000 that is a pretty hefty fee to pay (and the equivalent of an APR over 250%). It is still worth it for a couple days or weeks if it drops another 50% or so, but that fee is unpleasantly high. See Interactive Broker’s explanation for this policy.

*Disclaimer: I am short SWVI; have no position in any other stock mentioned; my positions may change at any time after this is posted. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.*

thanks for this info.

Yeah, wasn’t aware of this at all. Jesus H.

And that is on top of a 0.5% commission ($20) each way? They must make a lot of money from penny stock traders.

that is the maximum commission. I paid over $11,000 in commissions to IB last year.

Hi Michael

Can you give me some clues as how you set up your scanner at IB ? How can you find mono plays there ? I would love a scanner that finds plays in the moment like volume spiking over 500% over it average. How do you place it in IB. Thanks

I don’t think you can do that kind of scan with IB, at least not easily.

Hi Michael

My fees seem expensive. I am new to shorting and have a question. I shorted 1000 of CDE at 9.43 at fee rate of .72%. So 1000 X .72 X 10/ 360= 20. So am I paying $20 a day? Eventhough I am only in the trade for 2 hrs. I also Don’t know what you mean by APR.

APR = annual percentage rate. At a fee rate of 0.72% the calculation would be 1000 (shares) x 10.00 (stock price rounded up) x 0.0072 (rate) / 360 (days in a year in business interest terms to get 12 30-day months). You forgot to add two decimal places to the percentage to change it to a decimal.

Thanks for the help. So just to be clear.

Okay so 1000X10X0.0072/360= .20 So I am paying 20 cents a day extra to short this stock.

Mark

Mark — Yes, that is correct.

Is there a way to check the current interest rate you are paying on your short position?

It should show up in your daily account statement. At least with Interactive Brokers you can check by looking at the borrowable field in IB TWS.

I have borrowed 1250 shares of XZY at IB rate of 2.14%. How do I calculate how much am I paying daily ?

Take the share price, round it up to the nearest dollar, and then multiply it by the number of shares you are short. That is the position value for the purposes of calculating interest. Multiply that number by the APR quoted by IB, in this case .0214. That gives you annual interest. Divide by 360 to get daily interest (also charged on weekends by the way).

Is the shorting fee charged on top of the commission per share?

Yes, it is in addition to commissions.

I would like to short 1000 shares of SQQQ. When I look it up on the short sale availability page, I see this note: “Current Fee Rate**0.7891” but it doesn’t give any indication if that’s a yearly, monthly or daily fee. Assuming that it’s yearly and SQQQ is selling currently at $11.69 per share, rounded up to $12, multiply by 1000 shares = $12,000. So would I pay $12,000 times 0.7891% divided by 360 = $0.26 or 26 cents a day for every day I short that amount? Plus commissions of course.

That rate is already an APR, so rather than mulitplying 0.7891 by $12000 trade value, multiply the $12,000 by 0.007891, then divide by 360. So it will be 1/100 the fee you listed above 🙂