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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade -- Ignore unavailable to you. Want to Upgrade?

To: peter michaelson who wrote (733)	3/18/1998 12:55:00 PM
From: dpl	Respond to of 2120

>Second, cash comes into the account as a result of the short sale. One would initially believe that interest should be earned on this amount, but it seems not to be the case. I believe that one does not earn interest on cash derived from short sales.< Peter,some firms "do" or "did" pay interest on the credit balance.I know Fidelity did at one time. >Why would one not earn interest? The broker borrows the shares from another account cost-free, I think. The lender of the shares is paying interest on any borrowing he/she undertook to purchase those shares. < If you deal with a big firm they are "borrowing" the shares from another client for free.Read the paper you sign for a margin account. David

To: peter michaelson who wrote (733)	3/18/1998 1:43:00 PM
From: Spots	Read Replies (1) \| Respond to of 2120

Most brokers won't pay you interest. If you're a really big customer (half a million in shorts or so) you may be able to get nominal interest on the short cash balance, or so I read. Any exceptions to this are exceptions indeed. Yes, it's a free ride for the broker. Most brokers also mark your short position to market daily and charge you margin interest on the difference if it's value falls below the cash generated by the short. This is loads of fun and profit. For the broker. There may be brokers who do it better, but I don't know of one. ALL of the ones I've ever dealt with do some variation of this.