How does short selling affect my account's cash balance, borrowing status, and potential interest charges?

Short selling can have complex effects on your account's cash balance, borrowing status, and potential interest charges. Here is a comprehensive overview:

1. Impact on Cash Balance:
   • Ending Cash: Short selling initially increases your account's ending cash balance.
   • Adjusted Cash: Your adjusted cash (used for interest calculations) is calculated as your ending cash minus the collateral balance for settled short stock positions.
2. Borrowing Status:
   • Even with a positive ending cash balance after short selling, you may still be borrowing money if your adjusted cash is negative.
   • The cash you receive from selling borrowed shares is offset by short stock collateral, which can lead to a decrease in your adjusted cash balance.
3. Interest Charges:
   • There are two main types of interest charges related to short selling:
     1. Margin loan interest on any borrowed amount (based on adjusted cash)
     2. Short sell securities interest for borrowing securities to sell short
4. Factors Affecting Interest Charges:
   • Settlement Dates: Trades settle after the transaction date. Interest may be charged based on settlement dates rather than transaction dates.
   • Lag in Posting: There is typically a 1 business day lag for interest and hard to borrow fees to be posted to your account.
   • Overall Account Balance: The total value of all positions and currency denominations need to be considered.
5. Example Scenario:
   • If you short sell $300,000 in a $1 million account, then buy $1.3 million of securities:
     • Ending cash: $1.3 million
     • Actual borrowing: $300,000
     • You will pay interest on the $300,000 borrowed
6. Viewing Interest Information:
   • To view detailed interest information:
     1. Log in to Client Portal
     2. Click the Performance & Reports menu followed by Statements.
     3. In the Custom Statements panel, click the Create "+" icon on the right-hand side.
     4. Enter “Interest Details” as the Statement Name and "Activity" as the Statement Type
     5. Under Default Sections select your desired sections
     6. Under Optional Sections select “Interest Details”
     7. Expand the time period when running the statement for more comprehensive information
7. Checking Settlement Dates:
   • To view settlement date information:
     1. Log in to Client Portal
     2. Click Performance & Reports followed by Statements
     3. Select Trade Confirmation
     4. Select Period, Date, Format and Language
     5. Click View or Download, as desired
8. Current Rates:
   • For margin loan rates and short sale costs, see the Interactive Brokers website. 

Note

• Maintaining a cash balance greater than your short position does not necessarily prevent interest charges. The overall account structure, specific positions, and other factors need to be considered.

Additional Information

• Details on margin calculations and interest, visit the Margin Details page of the Interactive Brokers website.