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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: orkrious who wrote (84100)8/9/2007 8:51:38 AM
From: PerspectiveRead Replies (3) of 306849
 
OT: I know many use Interactive Brokers. Does anyone have any alternatives? They are making my life difficult by only permitting Tbill purchases in $1M blocks. Apologies if you're also reading Ewave thread.

Fido rep says they permit buying Tbills with short sale cash, but I remain skeptical. He hasn't been able to show me anything in writing, and the bit he did show me made it clear he *didn't* understand the problem.

If you have $10K cash, you can short 500 ACF for instance. Now you have your $10K cash, some tied up as collateral. *Everybody* lets you provide that collateral as Tbills if you wish, permitting it to earn risk-free interest. But now you also have $10K cash in the short sale account. The way IB calculates margin and short sale interest debits and credits, you MUST leave all that cash alone. They will pay you interest on it, but if you were to purchase Tbills with it, you begin paying margin debit interest.

See example #5 at the very bottom of this:

individuals.interactivebrokers.com

I think that would be the case if I were to attempt to dump all my cash into Tbills. I would have essentially a zero settled cash balance, assets in the form of the Tbills, and the large short balance. I would have to pay them margin debit interest on the dollar value of short sales if I understand correctly.

Has anybody dealt with this issue? Does anyone know who might be able to help me? It may seem trivial, but at tax time it works out to 1-2% of my portfolio, which we all must remember is the difference between an average long-term performance and a great one.

BC
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