Margin, position financing, Interest

Margin

When you open a position on a Future or an Option, you need to have the required "Margin" funds (also sometimes called "Coverage" available in your account.

Futures

The margins for Futures contracts are listed on our web site


To open a position on a Futures contract, you need to have a minimum amount of cash in your portfolio:

  • of the amount listed in the column "Intraday > Initial margin" when "Intraday" trading hours are in effect
  • of the amount listed in the column "Overnight > Initial margin" outside of these hours, when "Overnight" hours are in effect.

To maintain a position that's already open you need to make sure you have at least the minimum amount in the column "Position maintenance" (either intraday or overnight depending on the applicable requirements at the current time of day).

Click here to check intraday trading hours



To calculate margin on futures, multiply the margin of the Future by the number of contracts you want to execute. To place your order, the cash available in your portfolio must be greater than the margin required for the position you want to open - Here are some examples

Options

Margins on options are established with risk models which are specific to each exchange and to Interactive Brokers. These models depend on the type of position (Buy or Sell / Put or Call / "Naked" positions or covered/combo) - learn more.

Note that if you take a hedging position in the opposite direction of a position that is already opened (ex: between 2 options, between an option and its underlying asset), this can reduce the amount of margin required for your positions. The precise conditions for a reduction of margin to apply depend on each exchange. Check the exchange websites for more information.


Notes
  • To evaluate the cash available for trading, you need to take into account:
    • The margin already used by your open positions
    • The margin already used by your pending orders to enter the market (or by increasing position size)
    • The gains / losses of your open positions
  • Note that in case of special market conditions, or in anticipation of an important event (ex: elections, corporate actions...), Interactive Brokers may significantly increase margins without notice, or remove the possibility to acquire certain financial instruments on margin.
  • The placement of a pending order (ex: stop, limit) may be subject to margin requirements if its effect would be to increase your position size or reverse your position.
  • Interactive Brokers uses portfolio analysis models that take into account different scenarios (evolution of your positions and execution of your pending orders) and takes into account the most unfavorable scenario to determine margin requirements.


Position financing

On Forex and Stocks (and derivatives of stocks), if you take a position greater than the amount of cash in your account, Interactive Brokers may finance part of your position opening up to a certain limit (margin), specific to each type of instrument.

This financing is shown on your account via a negative balance in the currency in question. Interest applies to these negative balances when you keep this type of position overnight (see the "Interest" section below).

Forex

To calculate the margin required for a Forex position, you need to multiply the value of your position by the percent of margin required.
To place your order, the cash available in your portfolio must be greater than the margin required by the position you want to open. - Here is an example

Stocks

The margin required by interactive brokers for financing positions on stocks by Interactive Brokers depends on the stock and the time of day.

  • US Stocks* :
    • Intraday : 25% of the amount of the position for buying positions. 30% for selling positions.
    • Overnight : 50% of the value of the position.
  • EU Stocks* :
    • Intraday : 25% to 50% of the value of the position depending on the exchange
    • Overnight : 50% of the value of the position.

    * Certain stocks or exchanges may not be eligible for financing (ex: low market capitalization, stocks with specific or temporary risks related to current events). In this case, 100% of the position value is required to open the position.


Notes

Refer to the notes in the "Margins" section.




No margin calls

As indicated in its general conditions, the account holder Interactive Brokers does not make margin calls.

It is your complete responsibility to ensure that you have sufficient funds in your portfolio to cover the margin requirements of your positions and orders.

In case of insufficient margin, Interactive Brokers may liquidate some or all of your positions, without prior notice.




Interest on negative balances

Negative balances in your account may be notably caused by:

  • Financed positions
    Info
    Reminder - a position may be financed:
    - either because you want to open a position with a value greater than your available funds
    - or because you want to open a position in a currency which you do not own.


    Check the "Position financing" section to learn more.
  • Losses in a currency other than your portfolio's base currency

Here is the formula to calculate daily interest:

  • [negative balance] × [interest rate] / [number of days per year]
  • The interest rate applicable to each currency is indicated on the prices page of our website. Note that the global rate is composed of a fixed rate and a part which may vary daily. You will find examples below.

In your account statement, the interest cumulated for the current month is indicated under the label "Interest Accruals" or "Interest Accrued".

This interested is deducted from your account at the end of each month and appear

Examples

Example 1: interest related to a Forex position

Imagine the following scenario :

  • You have 10,000 € cash in your portfolio.
  • You buy 1 contract
  • After opening this position, the balance of the line USD in your portfolio would be:
    • USD : -50 000 X 1.2 $ = -60 000 $
  • The interest in USD are [Benchmark + 2.5 %] for positions up to 100 000 USD and the Benchmark (which varies daily) is 0.66 %. As a result, the global rate is 3.16%.
  • The daily interest if you stay in position overnight would be:
    • = [amount ] X [interst rate] / [number of days in the year]
    • = [60 000 $] X [3.16 %] / 365
    • = [60 000 $] X [3.16/100] / 365
    • = ~5.19 $

Example 2 : Interest related to a positions in stocks in your base currency

Imagine the following scenario :

  • You have 50,000 € in your portfolio.
  • You have a position in EUR stocks worth 75,000 €. Interactive Brokers financed 25,000 € of this position.
  • After having opened this position, the balance of the line EUR in your portfolio would be:
    • EUR : -25 000 €
  • The interest is [BM + 2.5%] up to 100,000 € and the BM which varies daily is 0.351%. As a result, the global interest rate would be 2.851%.
  • The daily interest if you stay in position overnight would be:
    • = [amount ] X [interst rate] / [number of days in the year]
    • = [25 000 €] X [2.851 %] / 365
    • = [25 000 €] X [2.851/100] / 365
    • = ~1.95 €

Example 3: Interest related to a position in "foreign" stocks

Imagine the following scenario :

  • You have 50,000 € in your portfolio.
  • You open a long position on stocks in USD worth 75,000 USD. Interactive brokers financed 100% of the position as you don't have any USD in your portfolio (the financing is possible because you have sufficient margin, even if it is in a different currency).
  • After opening this position, the balance of your portfolio would be:
    • EUR : +50 000 €
    • USD : -75 000 $
  • The interest in USD are [Benchmark + 2.5 %] for positions up to 100 000 USD and the Benchmark (which varies daily) is 0.66 %. As a result, the global rate is 3.16%.
  • The daily interest if you stay in position overnight would be:
    • = [amount ] X [interst rate] / [number of days in the year]
    • = [75 000 $] X [3.16 %] / 365
    • = [75 000 $] X [3.16/100] / 365
    • = ~6.49 $

Note that if you regularly trade stocks in a currency other than your base currency, you can limit interest payments by converting all or part of your funds to the currency in question.




Interest on short selling stocks

When you stay in position overnight on a position where you are short selling, fees apply (in addition to financing fees)

To see the details of these fees :

  • Connect to the account management interface
  • Click "Support", then "Tools"
  • Click "Short Stock (SLB) Availability"
  • In the window that opens, enter the ISIN* code of the stock in the field on the right side of the window, then click "Search".
  • In the results that are displayed, the interest rate will be displayed in the box "Current Fee Rate"
  • * To know the ISIN code of a stock, display its chart in your ProRealTime platform, then place the mouse over the "i" icon that appears in the chart window.

Calculation example

Imagine the following scenario :

  • We have a selling position of 10,000 € on an imaginary stock "ABC".
  • The interest rate for short sales is 0.75 %.
  • Calcul des frais par nuit :
    • = [position amount x interest rate] / days in the year
    • = [10 000 € x 0.75/100] / 365
    • = 75 € / 365
    • = 0.205 €
  • The interest per night would be 0.205 €.